Assume the current one-year interest rate on a bond is 4%, and the one-year expected rate a year from now is 8%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is
A. 4%.
B. 6%.
C. 8%.
D. 12%.
Answer: B
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Refer to the normal-form game of price competition shown below.Firm AFirm B??CD?A50,50500-x,200?B100,500-x50,50For what values of x is strategy B strictly dominant for firm A?
A. All x > 450 B. All x < 450 C. x < 50 D. x = 450
If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:
A. save is three-fifths. B. consume is one-half. C. consume is three-fifths. D. consume is two-fifths.
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
Which of the following statements is true of the long run?
A) Identical firms can enjoy positive economic profits. B) Identical firms face an upward-sloping supply curve. C) Non-identical firms can enjoy positive economic profits. D) Non-identical firms face a horizontal supply curve.