Given R₁ =

question 28

Multiple Choice

Given r₁ = .050 and r₂ = .054, what can you deduce about investor's expectations of future short-term interest rates if the expectations hypothesis is correct?

• A) Investors expect future short-term rates to be greater than current short-term rates.
• B) Investors expect future short-term rates to be less than current short-term rates.
• C) Investors expect future short-term rates to be equal to current short-term rates.
• D) Investors expect future short-term rates to be higher than current forward rates.