Pure expectations theory holds regarding the term structure

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One-year interest rates are 6 percent. The market expects one-year rates to be 7 percent one year from now. The market also expects one-year rates will be 8 percent two years from now. Assume that the pure expectations theory holds regarding the term structure. Which of the following statements is most correct?

Today’s three-year interest rate is 8 percent.

The yield curve is upward sloping.

Today’s four -year interest rate is 9 percent.

Today’s two-year interest rate is 7 percent.

Reference no: EM131599595

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