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Pure expectations theory

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Today, interest rates on 1 year T bonds yield 1.2%, interest rate on 2 year T bonds yield 2.05%, and interest rate on 3 year T bonds yield 3.8%.

  1. if the pure expectations theory is correct what is the yield on 1 yr T bond one year from now?
  2. if the pure expectations theory is correct what is the yield on 2 yr T bond one year from now?
  3. if the pure expectations theory is correct what is the yield on 1 yr T bond two years from now?

Reference no: EM132154726

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