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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 1 985 2 950 3. 910 4 870 (1) What is, according to the expectations theory, the one-year interest rate in one year? (7 marks) (2) What is, according to the expectations theory, the one-year interest rate in two years? (7 marks) (3) What is, according to the expectations theory, the one-year interest rate in three years? (6 marks)
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