Suppose the term structure of interest rates has these spot interest rates: r₁ = 6.2%. r₂ = 6.0%, r₃ = 5.8%, and r₄ = 5.6%.

a. What will be the 1-year spot interest rate in three years if the expectations theory of term structure is correct? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

1-year spot in 3 years %

b. If investing in long-term bonds carries additional risks, then how would the risk equivalent of a 1-year spot rate in three years relate to your answer to part (a)?

	Less than
	Greater than
	Equal to