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Author Question: Assume the current one-year interest rate on a bond is 4%, and the one-year expected rate a year ... (Read 51 times)

Jramos095

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Question 1

Assume the one-year interest rate on a bond is 6% and the expected one-year rate a year from now is 9%. According to the expectations theory of the term structure of interest rates, the two-year rate will be


◦ 6%.
◦ 7.5%.
◦ 9%.
◦ 15%.

Question 2

Assume the current one-year interest rate on a bond is 4%, and the one-year expected rate a year from now is 8%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is


◦ 4%.
◦ 6%.
◦ 8%.
◦ 12%.


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Marked as best answer by Jramos095 on Apr 19, 2019

JaynaD87

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