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Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 6.0%. Assuming the pure expectations theory is correct,
Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 6.0%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now? Question 20 options: a) 6.65% b) 6.74% c) 6.83% d) 6.92% e) 7.01%
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