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- T-bonds yield 3.6%.
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- T-bonds yield 3.6%. 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. Round your answer to four decimal places. Do not round intermediate calculations. 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. Round your answer to four decimal places. Do not round intermediate calculations. 9% 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. Round your answer to four decimal places. Do not round intermediate calculations. Check My Work (3 remaining) OIcon Key 3 of 7>
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