Assume the one-year interest rate on a bond is 9% and the expected one-year rate a year from now is

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Assume the one-year interest rate on a bond is 9% and the expected one-year rate a year from now is

Assume the one-year interest rate on a bond is 9% and the expected one-year rate a year from now is 11%. According to the expectations theory of the term structure of interest rates, the two-year rate will be:
A) 11%.
B) 9%.
C) 10%.
D) 5%.

Textbook

Principles of Macroeconomics

Edition: 11^th

Authors: Case, Fair, Oster

Read 197 times

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8 years ago

Good answer, thanks.

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