Suppose the Interest Rate on a 1-Year T-Bond Is 5

question 65

Multiple Choice

Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 7.0%.Assuming the pure expectations theory is correct,what is the market's forecast for 1-year rates 1 year from now?

• A)7.36%
• B)7.75%
• C)8.16%
• D)8.59%
• E)9.04%

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Definitions:

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Wave-like muscle contractions that move food through the digestive tract.

Secondary Oocyte

Oocyte in which the second meiotic division stops at metaphase II unless fertilization occurs.

Corpus Luteum

Yellow endocrine body formed in the ovary in the site of a ruptured vesicular follicle immediately after ovulation; secretes progesterone and estrogen.

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A primary male sex hormone and an anabolic steroid, important for male sexual and reproductive development, as well as muscle and bone mass.