Assume the current interest rate on a one-year bond is 7%, and the interest rate investors expect on the one-year bond one year from now is 3%
According to the expectations hypothesis, the current interest rate (per year) on a two-year bond should be A) 3%.
B) 5%.
C) 7%.
D) 10%.
B
Economics
You might also like to view...
If a currency rapidly depreciates, what are the possible negative results to the economy of using contractionary monetary policy to address the depreciation?
What will be an ideal response?
Economics
The Fed relies on open market operations, which work
a. with the Treasury in creating money to finance bonds. b. through major stock exchanges to influence bond prices. c. directly through the nonbank public to change their assets. d. through the banking system by affecting their reserves.
Economics