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Use the following information about todays U.S. Treasury STRIP yield curve to answer questions 19-21.

One year spot rate 1.25 % p.a.

Two year spot rate 1.30% p.a.

Three year spot rate 1.50% p.a.

19. What is the market consensus expectation of one year spot rates for delivery one year from now?

a. 1.35% p.a.

b. 1.63% p.a.

c. 1.90% p.a.

d. 1.30% p.a.

e. 1.50% p.a.

20. What is the market consensus expectation of one year spot rates for delivery two years from now?

a. 1.35% p.a.

b. 1.63% p.a.

c. 1.90% p.a.

d. 1.30% p.a.

e. 1.50% p.a.

21. How is the one year spot rate expected to change over the next year?

a. An increase of 8 basis points.

b. An increase of 10 basis points.

c. A decrease of 30 basis points.

d. An increase of 30 basis points.

e. An increase of 5 basis points.