Q12 According to the Expectations Theory of Term Structure, if the series of one-year interest rates over the next three years is 5%, 2% and 2%, the interest rates for a one-year bond, a two-year bond and a three-year bond will be equal to ____, ____ and _____ respectively.

a.

5%, 3.33%, 3.5%

b.

5%, 3.5%, 3%

c.

5%, 3.25%, 3%

d.

5%, 3%, 3.5%