A 5-year Treasury bond currently offers a 18% rate of return. A 6-year Treasury bond offers a 21% rate of return. The inflation rate in fifth year is 63 %.Under the expectations theory, what rate of return do investors expect a four year Treasury bond to pay during the fifth year?

calculate and provide complete steps of the real rate of return for fifth year? 

Answer rating: 100% (QA)

SOLUTION To calculate the expected rate of return for a fouryear Treasury bond during the fifth year under the expectations theory we need to consider the current rates of return for the 5year and 6ye... View the full answer