Q. 06: 25 * 100 basis potuts i percent One-year T-bill rates are expected to steadily increase by 250 basis points per year over the next nine years. Determine the required interest rate on a five-year T-bond and a nine-year T-bond if the current one-year interest rate is 15.5%. Assume that the Pure Expectations Hypothesis for interest rates holds. Solution: 5 Year boud Yr ol interest rate 15.5%