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Question regarding the pure expectations theory

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The one-year nominal interest rate is currently 13%. Because investors think that inflation will decline over the next three years, the one-year nominal interest rate is expected to be 11% one year from now, and 7.5% two years from now. Using only the pure expectations theory, what are the EXACT (3 decimal places; e.g. 5.382%) annual interest rates on two-year and three-year securities?

Reference no: EM131082512

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