Respuesta :
9.7% is the current 5-year rate expected by investors .
Let Current 5 year Rate be R
5 year Rate (R1) five years ago= 9.3% or 0.093
10 year Rate (R2) five years ago = 9.5% or 0.095
As per Expectation Theory,
(1 + R1)^Period * (1 + R)^Period = (1 + R2)^Period
(1 + 0.093)^5 + (1 + R)^5 = (1 + 0.095)^10
(1.093)^5 + (1 + R)^5 = (1.095)^10
1.5599 + (1 + R)^5 = 2.4782
(1 + R)^5 = 2.4782 / 1.5599
1 + R = 1.5887^(1/5)
R = 1.097 - 1
R = 0.097 or 9.7% [0.097 * 100]
The expectation theory (also known as the expectancy theory of motivation) postulates that people react or act in various ways because they are motivated to choose a certain conduct over others based on what they anticipate the outcome of that behavior to be. In essence, the outcome's attractiveness determines the motive behind the action choice.
However, the cognitive process through which a person interprets the many motivational components forms the basis of the theory. Before making the final decision, this is done. Making a choice on how to behave involves many other considerations in addition to the outcome.
To learn more about Expectation theory, checkout the link below :
https://brainly.com/question/20630240
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