According to the expectations theory, what will be the interest rate on a three-year bond if a one-year bond has an interest rate of 2% and is expected to have an interest rate of 3% next year and 5% in two year?
Report your answer using a percentage with two decimal places.
The interest rate on a three-year bond will equal (2 + 3 + 5 )/3 = 3.33%.
Economics
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