The current 1-year bond and 2-year bond interest rates are both 4% and the current 3-year bond interest rate is 5%. The expectations theory of the term structure predicts that the expected 1-year bond interest rate is _____% next year and ____% the year after.

The current 1-year bond and 2-year bond interest rates are both 4% and the current 3-year bond interest rate is 5%. The expectations theory of the term structure predicts that the expected 1-year bond interest rate is _% next year and % the year after.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Expectations Theory And The Economy

Section: Chapter Questions

Problem 11QP

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