According to the expectations theory of the term structure of interest rates, if the one-year bond rate is 3% and the two-year bond rate is 4%, next year's one-year rate is expected to be A. 4% B. 6% C. 5% D. 3%

According to the expectations theory of the term structure of interest rates, if the one-year bond rate is 3% and the two-year bond rate is 4%, next year's one-year rate is expected to be A. 4% B. 6% C. 5% D. 3%

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section: Chapter Questions

Problem 3SQP

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Question

According to the expectations theory of the term structure of interest rates, if the one-year bond rate is 3% and the two-year bond rate is 4%, next year's one-year rate is expected to be

A. 4%

B. 6%

C. 5%

D. 3%

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