If the expected path of 1-year interest rates over the next five years
If the expected path of 1-year interest rates over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and 5 percent, the expectations theory predicts that the bond with the highest interest rate today is the one with a maturity of
A) two years.
B) three years.
C) four years.
D) five years.
ANSWER
D
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