If the Expected Path of Interest Rates on One-Year Bonds

question 55

Multiple Choice

If the expected path of interest rates on one-year bonds over the next five years is 2%, 4%, 3%, 2%, and 1%, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity of

• A)one year.
• B)two years.
• C)three years.
• D)five years.

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