Question:
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Do an analysis similar to that in the right-hand portion of
1-year T-bill at beginning of year 1 3%
1-year T-bill at beginning of year 2 6%
1-year T-bill at beginning of year 3 5%
1-year T-bill at beginning of year 4 8%