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1 year 2.551% 2 year 2.720% 3 year 2.741% 5 year 2.908% The table shows bond maturities for china. Use the expectations hypothesis to calculate

1 year 2.551%
2 year 2.720%
3 year 2.741%
5 year 2.908%

The table shows bond maturities for china. Use the expectations hypothesis to calculate and predict interest rates as follows:

A, If the one-year interest rate is expected to be the same as the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now?

B, What interest rate is expected on a three-year bond one year from now? C, What relationship do you find between interest rates and maturity?

D, If investors attach term premiums of 2.5%, 1.75% and 2.85% to the one-, two- and three- year bonds: i. What would be the interest rate on a two-year security? ii. What would be the interest rate on a three-year security? iii. What is the forward rate for one-year Canada bonds one year from now? iv. What is the adjusted forward rate for one-year Canada bonds one year out?

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