Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The real risk-free rate of interest is 4 percent. Inflation is expected to be 3 percent this
coming year, jump to 4 percent next year, and increase to 5 percent the year after (Year 3).
According to the expectations theory, what should be the interest rate on 2-year, risk-free
securities today?
7.50%
O 5.50%
O 6.00%
O 7.00%
6.50%
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Transcribed Image Text:The real risk-free rate of interest is 4 percent. Inflation is expected to be 3 percent this coming year, jump to 4 percent next year, and increase to 5 percent the year after (Year 3). According to the expectations theory, what should be the interest rate on 2-year, risk-free securities today? 7.50% O 5.50% O 6.00% O 7.00% 6.50%
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