Question: Using expectations theory: You observe that there is a one - year Treasury bond with a yield of 6 . 0 % . You also

Using expectations theory:
You observe that there is a one-year Treasury bond with a yield of 6.0%. You also assume that rates will increase and that the one-year bond will increase by 1.0% each year. For example, you expect the one-year bond in year 2 will be 7.0% and 8.0% in year 3.
With that information, what do you expect the 3-year interest rate to be in % terms?
What rate (in %s) do you expect a 5-year bond to have?

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