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Assume the Expectations Hypothesis Regarding the Term Structure of Interest

Question 6

Multiple Choice

Assume the Expectations Hypothesis regarding the term structure of interest rates is correct.Then, if the current two-year interest rate is 5% and the current one-year rate is 6%, then investors expect the future one-year rate to be:


A) 4%.
B) 5%.
C) 6%.
D) 1%.

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