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1. Assume the following rates for bonds with equivalent risk: Maturity Yield 1 Year 8.00% 2 Years 8.10% 3 Years 8.30% 4 Years 8.60% 5

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1. Assume the following rates for bonds with equivalent risk: Maturity Yield 1 Year 8.00% 2 Years 8.10% 3 Years 8.30% 4 Years 8.60% 5 Years 8.80% Assume the pure expectations theory holds. What does the market expect will be the interest rate on: a. A 2-Year bond in 2 Years b. A 1-Year bond in 4 Years c. A 3-Year bond in 1 Year

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