The variable f_1,1 as used in the expectations theory is interpreted as the forward rate for one year: A) based on the prior one-year rate. B) at 1 percent. C) based on a 1 percent increase from the current rate. D) commencing in one year. E) based on a 1 percent probability of occurrence.

Question

Quizplus · Accepted Answer

The variable f_1,1 represents the one-year forward rate commencing in one year, which means it is the rate that will apply starting one year from today. Therefore, the best choice is D.

The Variable F1,1 as Used in the Expectations Theory Is

The Variable F_1,1 as Used in the Expectations Theory Is