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Pure expectations theory

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As of today the annualized two-year interest rate is 12.7 percent and the one-year interest rate is 10.9 percent. What is the one-year forward rate (or the one-year rate one year from now) according to the pure expectations theory given that investors are indifferent among security maturities? Assume that there is no liquidity premium to account for.

Reference no: EM132118680

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