You are considering 1-year investments in Treasury STRIPS at 1, 2, or 3 years to matu. rity. The current term structure of spot rates is below Maturity 1Y Spot rate 2.25% 2.0% 2Y 3Y 1.8% Assuming you only care about expected returns, what should you buy under each of the following assumptions about future interest rates? Decompose the expected returns into a roll down and the interest rate risk component, and explain how these components are affected by the maturity and changes in interest rates. (a) You expect all the rates to stay the same. (b) You expect all the rates to go up by 0.5%. (c) You expect all the rates to go down by 0.5% You are considering 1-year investments in Treasury STRIPS at 1, 2, or 3 years to matu. rity. The current term structure of spot rates is below Maturity 1Y Spot rate 2.25% 2.0% 2Y 3Y 1.8% Assuming you only care about expected returns, what should you buy under each of the following assumptions about future interest rates? Decompose the expected returns into a roll down and the interest rate risk component, and explain how these components are affected by the maturity and changes in interest rates. (a) You expect all the rates to stay the same. (b) You expect all the rates to go up by 0.5%. (c) You expect all the rates to go down by 0.5%