Today, you observed the following information in the bond-related market. All the rates are annualised. iT is

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Question:

Today, you observed the following information in the bond-related market. All the rates are annualised. iT is the current interest rate for a T-year bond, ie1,t is the expected interest rate (of a 1-year bond) invested at time t.

Interest Rate

Future Expected

Interest Rate

i1

5.23%

ie1,0

(Missing 3)

i2

(Missing 1)

ie1,1

4.62%

i3

(Missing 2)

ie1,2

4.61%

Using the Expectations Theory, fill the three missing spaces in the above table with detailed steps and then briefly comment on your results. The question involves annual compounding