Question:

The one-year interest rate over the next 10 years will be 3%, 4%, 6%, 7%, 9%, 10%, 13%,14%, 16%, 18%. Using the pure expectations theory, what will be the interest rates on a 9-year bond?A liquidity premium of 10 basis points is required for each year of a bond's maturity.

A) 11.01 %

B) 16.9 %

C) 10.01 %

D) 12.01%

E) 17.9 %