Suppose the current 1-year discount rate on US government bonds is 3% and the 2- year rate is at 6%. What is the implied expected 1-year rate next year, assuming the expectations theory is the correct theory of the yield curve?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Suppose the current 1-year discount rate on US government bonds is 3% and the 2-
year rate is at 6%. What is the implied expected 1-year rate next year, assuming the expectations
4.
theory is the correct theory of the yield curve?
Transcribed Image Text:Suppose the current 1-year discount rate on US government bonds is 3% and the 2- year rate is at 6%. What is the implied expected 1-year rate next year, assuming the expectations 4. theory is the correct theory of the yield curve?
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