The oneyear spot interest rate is r1 68 and the twoyear rat

The one-year spot interest rate is r1 = 6.8%, and the two-year rate is r2 = 7.8%. If the expectations theory is correct, what is the expected one-year interest rate in one year’s time? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected interest rate

Expected one year rate in one year=(1+rate for 2 years)^2/(1+rate for 1 year)-1=1.078^2/1.068-1=8.81%