According to the expectations theory of the term structure of interest, if the 1-year bond rate today is 6% p.a. and the 2-year bond rate today is 7% p.a., what is the 1-year bond rate next year? A. 6% B. 6.75% C. 7.5% D. 8%
According to the expectations theory of the term structure of interest, if the 1-year bond rate today is 6% p.a. and the 2-year bond rate today is 7% p.a., what is the 1-year bond rate next year? A. 6% B. 6.75% C. 7.5% D. 8%
Chapter5: The Cost Of Money (interest Rates)
Section: Chapter Questions
Problem 7PROB
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According to the expectations theory of the term structure of interest, if the 1-year bond rate today is 6% p.a. and the 2-year bond rate today is 7% p.a., what is the 1-year bond rate next year?
A. 6%
B. 6.75%
C. 7.5%
D. 8%
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