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**Unformatted text preview: **increasing Question 2 [1 mark] If one year maturity interest rates are 4 percent, and two year maturity interes percent, one year interest rates are expected to (a) fall by 2 percent over the next year. [b] Fall by 1 percent over the next year (c) be unchanged over the next year. d) ise by 1 percent over the next year (e) rise by 2 percent over the next year. Question 3 [1 mark] if nominal interest rates are 2 percent and the real interest rate (a) nominal interest rates are expected to fall (b) nominal interest rates are expected to increase (c) prices are falling W prices are increasing (e) real interest rates are expected to fall (1) real interest rates are expected to increase Question 4 (imark] At time t, 1 year, 2 year, and 3 year interest rates are 6% 7%, and respectively. Assuming expectations are forward looking and rational, what is the expected valur 2 year interest rates att1? (a) 6% (b) 7% (CL83 ( 9% (e) 10%...

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- Fall '19