Consider a 2-year bond whose par value is $1,000 and coupon rate is 6% per year, payable semi-annually. The bond's current price is such that its yield to maturity is 5.50% p.a., continuous compounding. Suppose also that the current term structure of spot interest rates is as follows:

Under the Unbiased Expectation Hypothesis, how much do you expect the three-month spot rate to be in 18 months from now?

Term (years) 0.50 1.00 Rate (% p.a., continuous compounding) 4.445% 4.740% 1.50 5.060% Term (years) 0.50 1.00 Rate (% p.a., continuous compounding) 4.445% 4.740% 1.50 5.060%