You observe the following yield curve for Treasury securities: 1 year = 6%; 2 year = 5.8%; 3 year = 5.5%; 4 year = 5.6%; 5 year = 5.8% Assume that the expectations theory holds. What does the market expect that three-year interest rates will be one year from today?

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According to the expectations theory the markets expectation for future interest rates is bas... View the full answer