One$-$year interest rates are $3$ percent. The market expects one$-$year rates to be $5$ percent one year from now. The market also expects one$-$year rates to be $7$ percent two years from now. Assume that the unbiased expectations theory holds. Which of the following is correct?

Multiple Choice

The yield curve is downward sloping.

The yield curve is flat.

The yield curve is upward sloping.

We need the maturity risk premiums to be able to answer this question.