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Expected one-year interest rates are tabulated below. Year Expected 1-Year Rate 1 2 3 4 2.00% 2.00% 6.25% 6.25% 7.25% According to the (unbiased/pure) expectations

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Expected one-year interest rates are tabulated below. Year Expected 1-Year Rate 1 2 3 4 2.00% 2.00% 6.25% 6.25% 7.25% According to the (unbiased/pure) expectations theory, the interest rate for a five- year loan should be (approximately): Your Answer: Answer units Previous Page Next Page Page 16 of 2

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