Question: Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.6%, interest rates on 2-year T-bonds yield 2.2%, and interest rates on 3-year T-bonds yield 3.2%.
Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.6%, interest rates on 2-year T-bonds yield 2.2%, and interest rates on 3-year T-bonds yield 3.2%. 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. 96 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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