5. You observe the following yield curve for Treasury securities:

Maturity Yield

1 year 5.5%

2 years 5.8

3 years 6.0

4 years 6.3

5 years 6.5

Assume that the pure expectations hypothesis holds. What does the market expect will be the yield on 4-year securities, 1 year from today?

6. Three-year Treasury securities currently yield 6%, while 4-year Treasury securities currently yield 6.5%. Assume that the expectations theory holds. What does the market believe the rate will be on 1-year Treasury securities three years from now?

7. Currently, 3-year Treasury securities yield 5.4%, 7-year Treasury securities yield 5.8%, and 10-year Treasury securities yield 6.2%. If the expectations theory is correct, what does the market expect will be the yield on 3-year Treasury securities seven years from today?

8. Three-year treasury securities yield 5%, 5-year treasury securities yield 6%, and 8-year treasury securities yield 7%. If the expectations theory is correct, what is the expected yield on 5-year Treasury securities three years from now?