Problem 6-17 Expectations hypothesis and interest rates [LO4] Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year T-bill at beginning of year 1 5 % 1-year T-bill at beginning of year 2 8 % 1-year T-bill at beginning of year 3 7 % 1-year T-bill at beginning of year 4 10 %
Input variables:
1-year rate Year 1	5	percent
1-year rate Year 2	8	percent
1-year rate Year 3	7	percent
1-year rate Year 4	10	percent
Solution and Explanation:
2-year security		percent
3-year security		percent
4-year security		percent