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Suppose the interest rate on a 1-year T-bond is 5.10% and that on a 2-year T-bond is 8.30%. Assuming the pure expectations theory is correct,
Suppose the interest rate on a 1-year T-bond is 5.10% and that on a 2-year T-bond is 8.30%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now? Do not round your intermediate calculations. Round your final answer to 2 decimal places. a. 6.70% b. 5.98% c. 11.60% d. 12.19% e. 8.18%
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