Over the next three years, the expected path of 1-year inter…
Over the next three years, the expected path of 1-year interest rates is 4%,1%, and 1%. Today if you buy $1 of one-year bond and when it matures you use the money you receive to buy another one-year bond, then your expected return for this $1 investment is ______ %. The expectations theory of the term structure implies that the current interest rate on 2-year bond must be _____%.