Question: Use the data below to answer questions 16 and 17 Spot interest rates for different maturities Time to maturity Spot Rate 1-year 2.50% 2-year 2.75%

Use the data below to answer questions 16 and 17

Spot interest rates for different maturities

Time to maturity

Spot Rate

1-year

2.50%

2-year

2.75%

3-year

3.00%

5-year

3.50%

  1. According to the expectations hypothesis, what is the implied one-year forward rate two years from now?

  1. According to the expectation hypothesis, what is the implied two-year forward rate three years from now? (rates provided in annual basis).

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