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.

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