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You observe the following yield curve for Treasury securities: Maturity Yield 1 Year 2.60% 2 Years 3.80% 3 Years 4.50% 4 Years 4.70% 5 Years

You observe the following yield curve for Treasury securities:

Maturity Yield

1 Year 2.60%

2 Years 3.80%

3 Years 4.50%

4 Years 4.70%

5 Years 6.00%

Assume that the pure expectations hypothesis holds. What does the market expect will be

the yield on 3-year securities, 2 year from today?

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