1/28/2020 08: The Cost of Money interest Rates): SP20 CTE2001JFHAJ Banking & Finance Assessment 0/1 pts Incorrect Question 33 Following are the yields on selected Treasury securities: Maturity Yield 2 years 1.6% 3 years 4 years Using the expectations theory, compute the expected one-year interest rate in Year 3. That is, compute the rate that is expected to exist only during Year 3. (Base your answer on an arithmetic average rather than a geometric average.) 2.2% Incorrect. The yield on any bond is the average of the annual, or one- year, interest rates that are expected during its life. For example, the yield on the two-year bond = (R1 + R2)2 = 1.6%, which means that R1 + R2 = 1.6%(2) = 3.2% See 5-3: The Term Structure of Interest Rates 1.6% 3.4% 1.9% 3.0%