Question: Assume that the current one year rate is 4% and investors expect the following future rates: 1 year rate for year 2: 4.5% 1 year

Assume that the current one year rate is 4% and investors expect the following future rates:

1 year rate for year 2: 4.5%

1 year rate for year 3: 4.8%

1 year rate for year 4: 5%

What is the interest rate for a 4 year issue based on the expectation hypothesis of the term structure of interest rates?

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