Question: Quantitative Problem: Today, interest rates on 1 -year T-bonds yield 1.6%, interest rates on 2 -year T-bonds yield 2%, and interest rates on 3-year T-bonds

Quantitative Problem: Today, interest rates on 1 -year T-bonds yield 1.6%,

Quantitative Problem: Today, interest rates on 1 -year T-bonds yield 1.6%, interest rates on 2 -year T-bonds yield 2%, and interest rates on 3-year T-bonds yield 3.8%. a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. % b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. % c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. %

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