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Assume that the current one-year rate is 6% and investors expect the following future rates: One-year rate for year 2: 6.5% One-year rate for year
Assume that the current one-year rate is 6% and investors expect the following future rates:
One-year rate for year 2: 6.5%
One-year rate for year 3: 7%
One-year rate for year 4: 7.5%
What is the interest rate for a 4-year issue based on the expectations hypothesis of the term structure of interest rates?
Select one:
a. 6.75%
b. 6.15%
c. 5.48%
d. 4.72%
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