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3. The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000. Suppose the interest rate is compounded

3. The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000. Suppose the interest rate is compounded once per year. Maturity (Years) Price ($) 1 950 2 920 3 900 4 875 Answer the following questions:

(a) What is, according to the expectations theory, the one-year interest rate in the second year?

(b) What is, according to the expectations theory, the one-year interest rate in the third year?

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