Suppose the Interest Rate on a 1-Year T-Bond Is 5

question 65

Multiple Choice

Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 7.0%.Assuming the pure expectations theory is correct,what is the market's forecast for 1-year rates 1 year from now?

• A)7.36%
• B)7.75%
• C)8.16%
• D)8.59%
• E)9.04%

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Definitions:

Spells Of Unemployment

Spells of unemployment refer to the durations during which an individual is continuously unemployed, often tracking the frequency and length of these periods over a person's career.

Ideal Labor Market

An ideal labor market is a theoretical construct where there is perfect competition, equal access to information, and no barriers to entry or exit, leading to efficient employment outcomes.

Workers Without Jobs

Individuals who are actively seeking employment but are unable to find work.

Structural Unemployment

Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one.