Following Are the Yields on Selected Treasury Securities ?Using the Expectations Theory, Compute the Expected One-Year Interest Rate

question 35

Multiple Choice

Following are the yields on selected Treasury securities:
$\begin{array}{cc}\text { Maturity } & \text { Yield } \\\hline \text { 2 years } & 1.6 \% \\\text { 3 years } & 2.2 \\\text { 4 years } & 2.4\end{array}$
?Using the expectations theory, compute the expected one-year interest rate in Year 3. That is, compute the rate that is expected to exist only during Year 3. (Base your answer on an arithmetic average rather than a geometric average.)

• A)2.2%
• B)1.6%
• C)3.4%
• D)1.9%
• E)3.0%

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Definitions:

Long-Term Memories

An alternative phrasing regarding the component of the memory system involved in the storage and retrieval of information over extended periods, emphasizing its enduring nature.

Hippocampus

A part of the limbic system in the brain that is crucial for memory formation and spatial navigation.

Thalamus

A large mass of gray matter deeply situated in the forebrain that plays a critical role in relaying sensory signals to the cerebral cortex and regulating consciousness, sleep, and alertness.

Hypothalamus

A small region of the brain located below the thalamus that plays a crucial role in many important functions, including releasing hormones, regulating body temperature, and managing hunger and thirst.