If the Expected Path of 1-Year Interest Rates Over the Next

question 80

Multiple Choice

If the expected path of 1-year interest rates over the next four years is 5 percent,4 percent,2 percent,and 1 percent,then the expectations theory predicts that today's interest rate on the four-year bond is

• A)1 percent.
• B)2 percent.
• C)3 percent.
• D)4 percent.

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Definitions:

Gold Rush

A rapid movement of people to an area where gold has been discovered, with significant historical occurrences in the United States, Australia, and South Africa.

Prospectors

Individuals who search for mineral deposits, particularly gold and silver, often during historical gold rushes.

California

A state located on the west coast of the United States, known for its diverse geography, significant economic contributions, and cultural influence.