Question: Question 23 (4 points) Suppose the interest rate on a 1-year Treasury bond is 3.50 percent and that on a 2-year Treasury bond is 5.00

Question 23 (4 points) Suppose the interest rate on a 1-year Treasury bond is 3.50 percent and that on a 2-year Treasury bond is 5.00 percent. According to the (pure/unbiased) expectations theory, (approximately) what does the market forecast the 1-year rate to be 1 year from now? Your Answer: Answer units Question 22 (4 points) Suppose that 1-year interest rates expected for the next 5 years are as follows: Year Year 1 Year 2 Year 3 Year 4 Year 5 1-year rate 2.00% 4.00% 3.25% 7.25% 3.25% According to the (unbiased/pure) expectations theory, the interest rate for a 5-year loan should be (approximately): Your Answer: Answer units

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