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Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.8%, interest rates on 2-year T-bonds yield 2.1%, and interest rates on 3-year T-bonds yield a8%,
Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.8%, interest rates on 2-year T-bonds yield 2.1%, and interest rates on 3-year T-bonds yield a8%, a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations. Show All Feedback b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations. Show All Feedback 03 c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Round your answer to four decimal places. Do not round intermediate calculations Show All Feedback
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