Question 14 (4 points) The real risk-free rate is 2.00 percent. Inflation is expected to be 2.00 percent this year, 5.00 percent next year, and then 7.50 percent thereafter. The maturity risk premium is estimated to be 0.06 percent * (t - 1), where t is the number of years to maturity. What (approximately) is the nominal interest rate on a 7-year Treasury security? Your Answer: Answer units Question 15 (4 points) Suppose the interest rate on a 1-year T-bill is 5.00 percent and that on a 2-year T- bond is 7.50 percent. According to the (unbiased/pure) expectations theory, (approximately) what does the market forecast 1-year rates to be 1 year from now? Your Answer: Answer units Question 16 (4 points) Expected one-year interest rates are tabulated below. Year Expected 1-Year Rate 1 2 3 4 5 5.00% 4.00% 5.25% 6.25% 6.25% According to the (unbiased/pure) expectations theory, the interest rate for a five- year loan should be (approximately): Your Answer: Answer units