Using expectations theory:

You observe that there is a one-year Treasury bond with a yield of 2.0%. You also assume that rates will be going up and that the one-year bond will go up by 0.5% each year. As an example, you expect the one-year bond in year 2 will be 2.5% and 3% in year 3.

1. With that information, what do you expect the 3-year interest rate to be?

2. Using the information above what interest rate would you expect a 5-year bond to have?