a. Given the 5-year rate and the 10-year rate, what should the 5-year rate in 5 years be according to the Expectations Theory?

b. Using the rates used and calculated in a, what should the prices of the 5-year Treasury today, the 10-year Treasury today, and the 5-year Treasury in 5 years be? What would the holding period return be if you invested in the two 5-year Treasuries? What would the holding period return be if you invested in the 10-year Treasury? Show work for your calculations and the timelines drawn. Assume these Treasuries have a par of $100 and dont pay any coupons.

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