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

question 74

Multiple Choice

If the expected path of one-year interest rates over the next five years is 2 percent,4 percent,1 percent,4 percent,and 3 percent,then the pure expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity of

• A) one year.
• B) two years.
• C) three years.
• D) four years.

---

Definitions:

Method Call

The process of invoking a method's functionality in a program, allowing it to execute its tasks.

Object

In programming, an instance of a class that may contain attributes and methods to simulate entities with specific characteristics and behaviors.

Class

A template or blueprint for creating objects, defining what attributes and methods they have in object-oriented programming.

Method

A function defined in a class that usually performs a specific operation or action, taking zero or more arguments.