You observe that the 6-month spot rate is 3%, the 1-year spot rate is 3.5%,...
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Finance
You observe that the 6-month spot rate is 3%, the 1-year spot rate is 3.5%, and the 2-year spot rate is 4.2%. Under the pure expectation theory of the term structure, what can you say about investors expectation of future rates?
Group of answer choices
Rates must be lower in the future
Cannot be determined
Rates must be higher in the future
Rates must be the same in the future
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