Suppose that 1-year interest rates expected for the next 5 years are as follows: —1 Year Year 1 Year 2 Year 3 Year 4 Year 5 1-year rate 5

Finance Oct 22, 2020

Suppose that 1-year interest rates expected for the next 5 years are as follows:
—1 Year Year 1 Year 2 Year 3 Year 4 Year 5 1-year rate 5.00% 4.00% 7.25% 4.25% 4.25%
According to the (unbiased/pure) expectations theory, the interest rate for a 5-year loan should be (approximately):

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