The following table shows the price of $1000 face value 1-year, 2-year, 3-year, 9-year and 10-year US Treasury zero coupon bonds as of March 2018. Use pure expectations hypothesis to determine:

a. the interest rate for the 1-year bond.

b. the expected interest rate on a 1-year bond one year from now, in year 2?

b. the expected interest rate on a 1-year bond two years from now, in year 3?

c. the expected interest rate on a 1-year bond nine years from now, in year 10?

What is the bond market telling us about the future path of 1-year interest rates?

1-yr 2-yr 3-yr 9-yr 10-yr U.S. Treasury (March 2018) 982.51 965.31 948.41 783.17 759.11