Over the next three years, the expected path of 1-year interest rate is 4, 1, and 1 percent. 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 rate of return for this $1 investment is ____% (round to the nearest integer). If the expectations theory of the term structure is true, then it implies that the current interest rate on 2-year bond must be ____% (round to one decimal place x.x)

Explain why negative real interest rates cannot exist in an economy that is properly functioning

You are considering purchasing a 10-year bond and follow the theory of rational expectations. If you have justread the annual report of the central bank in your country that states interest rates are higher than expected,will you buy the bond today or in the next month?