. In this chapter, we discussed using expectations theory to find expected future interest rates, but we only discussed estimating expected rates covering a one-year period. However, the process can be generalized to estimate future interest rates over multi-year periods. Use the data in figure 3-7 for April 2004 to estimate the expected annualized interest for a two-year security that starts three years in the future. ( hint: this security spans years four and five and the figure contains current rates for three- and five-year securities.)

april 2004 two year security 2.21%

april 2004 three year security 2.74%

april 2004 five year security 3.52%