Cox, INGERSOLL, AND Ross [1] distinguished various forms of the expectations hypothesis of the term structure of interest rates. They proved that, with one exception, these are consistent with general equilibrium only in the trivial case in which interest rates are nonrandom. The exception is the Local Expectations Hypothesis. Because of this nonexistence result, those who regard the expectations hypothesis as a natural starting point in investigating the term structure of interest rates are motivated to understand under what restrictions the local expectations hypothesis is valid. In our experience, many readers of Cox, Ingersoll, and Ross's paper-particularly those not conversant with stochastic calculus-have difficulty following the discussion. Such readers may find it easier to work through an analysis of the local expectations hypothesis in a more familiar discrete-time framework. This paper provides such an exposition. In continuous time, the local expectations hypothesis states that the conditional expected rates of return on bonds of all maturities over the next instant are equal to each other and to the instantaneous spot interest rate. Cox, Ingersoll, and Ross proved (p. 783 ff.) that the local expectations hypothesis is valid in an exchange economy if the dynamics of consumption are locally certain. In a stochastic constant-returns-to-scale production economy, they showed that the local expectations hypothesis will be valid under locally certain production dynamics if, in addition, agents have logarithmic utility. The analogous definition of the local expectations hypothesis in discrete time is that the conditionally expected one-period rates of return on bonds of all maturities are equal to each other and to the one-period interest rate. Two examples below illustrate that the local expectations hypothesis is valid in discrete-time economies under the same conditions as in continuous-time economies. These examples work because a sufficient condition for the validity of the local expectations hypothesis is that the marginal utility of consumption be locally certain. This might happen either because consumption itself is locally certain (as in both of the above-mentioned examples) or because the utility function exhibits risk neutrality and there is strictly positive consumption in every period. A third example shows that risk neutrality alone does not imply the local expectations hypothesis if zero consumption can occur. The reason is that the implication of risk neutrality that rates of interest are nonrandom requires the exclusion of corner solutions, a restriction which is violated if zero consumption can occur.