Interest rates on 4-year Treasury securities are currently 5.35%, while 6-year Treasury securities yield 7.25%.

If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.

Expectations Theory 4-yr. Treasury security yield 5.35% 6-yr. Treasury security yield 7.25% Algebraic solution: Formulas Total return earned on 6-year securities #N/A Total return earned on 4-year securities #N/A Yield on 2-yr. securities, 4 years from now #N/A Geometric solution: 1 + Total return earned on 6-year securities #N/A 1 + Total return earned on 4-year securities #N/A Yield on 2-yr. securities, 4 years from now #N/A