The date today is January 1, 2010. A one-year security maturing on 1/1

The date today is January 1, 2010. A one-year security maturing on 1/1/11 yields 3%. A two-year security
maturing on 1/1/12 yields 6%. A three-year security maturing on 1/1/13 yields 11%.

Calculate the expected
annual return on a two-year security beginning 1/1/11 and maturing on 1/1/13.

ANSWER

$1,000 × (1.11)3 = $1,367.63 at the end of three years (1/1/13)
$1,000 × (1.