Problem #1 Imagine that in a given point in time we observe the following yields to maturity in = 1%, igt = 2%, igt = 3%, and I4]; = 4%. Furthermore, assume that in this economy investors View a sequence of one period bonds as a perfect substitute for a long term bond. i) What is the expected short term interest rate two periods from period t? ii) Imagine that there is a rumor that the FED will cut the interest rate in two periods by 1 percentage point to avoid an upcoming economic slowdown. What is the impact on the yields to maturity in such a case