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Assume an investor has a choice of three consecutive one-year bonds or one three-year bond. Assuming the expectations hypothesis of the term structure of interest
Assume an investor has a choice of three consecutive one-year bonds or one three-year bond. Assuming the expectations hypothesis of the term structure of interest rates is correct, the Multiple Choice current one-year interest rate must equal the current three-year interest rate. three consecutive one-year bonds must have the same interest rate. average interest rate of the three consecutive one-year bonds should be less than the three-year bond to reflect the risk premium. interest rate of the three-year bond should equal the average interest rate of the three one-year bonds
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