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(Solved): Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 6.0%.
Assuming ...
Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 6.0%.
Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1
year from now?
a.
6.65%
b.
6.74%
c.
6.83%
d.
6.92%
e.
7.01%