1)Use the data on Treasury securities in the table to answer the following question:

1 year2 year3 year

0.75%1.25%2.5%

Assuming the liquidity premium theory is correct, what did investors on this day expect the interest rate to be on the one year Treasury bills two years from now if the term premium on a two year Treasury note was 0.1% and the term premium on a three year Treasury note was 0.3%? Show your work.