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The interest rate on one-year treasury bonds is 1.0 percent, the rate on two-year T-Bonds is 0.9 percent, and the rate on three-year T-bonds is

The interest rate on one-year treasury bonds is 1.0 percent, the rate on two-year T-Bonds is 0.9 percent, and the rate on three-year T-bonds is 0.8 percent. Using the expectations theory, compute the expected one-year interest rates in:

a) The second year (Year 2 only)

b) The third year (Year 3 only)

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