Suppose that the interest rate on one-year bonds is currently 2.5 percent and is expected to be 2 percent in one year and 4 percent in two years. Using the expectations hypothesis, compute the yield curve for the next three years.
Instructions: Enter your responses rounded to the nearest two decimal places.
Yield for one-year bond = ___%
Yield for two-year bond = ___%
Yield for three-year bond = ____ %