You have collected the following forecasts of 1-year Treasury bill rates:

Beginning of year	1	2	3
1-year T-bill rate	2%	6%	9%

Attempt 1/3 for 10 pts.

Part 1

What rate of return would you expect on a 2-year Treasury note if the pure expectations theory is valid? Disregard cross-product terms, i.e., use the best approximation.

Attempt 1/3 for 10 pts.

Part 2

What rate of return would you expect on a 3-year Treasury note if the pure expectations theory is valid?