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.