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You observe that the current spot rate curve slopes monotonically upward, as shown in the table and plot below. Spot Rate Years 12 10 .
You observe that the current spot rate curve slopes monotonically upward, as shown in the table and plot below. Spot Rate Years 12 10 . 8 Rate 6 4 2. 0 2 2. 4 6 8 14 16 18 20 10 12 Years 1 2 3 4 5 6 7 8 9 10 11 12. 13 14 15 16 17 18 19 20 5.571 6.088 6.555 6.978 7.361 7.707 8.020 8.304 8.561 8.793 9.003 9.193 9.365 9.520 9.661 9.789 9.904 10.008 10.103 10.188 FIGURE 4.2 Spot rate curve. The yearly rate of interest depends on the length of time funds are held. According to the term structure explanation called expectations theory, this observation implies that the market expects all future spot rates to increase. O True False
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