Suppose the term structure of interest rates has these spot interest rates: r1 = 5.7%. r2 = 5.5%, r3 = 5.3%, r4 = 5.1%, and r5 = 6.7%.

What will be the 1-year spot interest rate in two years if the expectations theory of term structure is correct?

Multiple Choice

4.5%

5.4%

4.9%

5.2%

5.6%