Assume that today, one-year Treasury bills yield 7.5 percent and 2-year Treasury securities yield 6.8 percent. Assume that the expectations theory holds. What is your prediction of the one-year rate on Treasury bills one year from today?

Now assume that the 3-year Treasury rate is 6 percent and the 7-year Treasury rate is 8.5 percent. If the Pure Expectations Hypothesis is true, what is your prediction of the 4-year Treasury rate, 3-years from now?

True or False: The yield on a 4-year Treasury bond will always exceed the yield on a 6-year Treasury bond. Explain your answer.

Please show your work.