At t = 0, the yield curve is flat at 5%. An instant later, the Fed announces that it will take the necessary monetary policy actions at t = 0 to lower the short-term interest rate at t = 0 to 3%. (For simplicity, the short-term rate is the 1-year spot rate). Further, the Fed states that it expects to remain on hold for about two years. Right after the announcement, the yield curve becomes: r0,1 = 3%, r0,2 = 3.1%, and r0,3 = 4%. 1. Basedonthetraditionalexpectationshypothesis,whatwerethemarket'sexpectationsforr1,1and r2,1 right before the announcement at t = 0? 1 2. Based on the traditional expectations hypothesis, what are the market's expectations for r1,1 and r2,1 right after the announcement at t = 0? 3. WhymighttheFed'sannouncementatt=0thatitwilllowertheshort-termrateincreaseexpecta- tions of r2,1 relative to what they were before the announcement