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You observe the following yields on Treasury securities of various maturities: Maturity Yield 4% 5 1 year 2 year 3 year 4 year 5 year

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You observe the following yields on Treasury securities of various maturities: Maturity Yield 4% 5 1 year 2 year 3 year 4 year 5 year 6 7 8 Using the expectations theory, forecast the interest rate on two-year Treasuries, 2 years from now. (That is, what will be the yield on 2-year Treasuries, issued in 2 years' time?) 12.86% 9.04% 10.25% 5.22%

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