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Suppose the interest rate on a 1-year t-bond is 50 and that

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Suppose the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bond is 7.0%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now?

a. 7.36%
b. 7.75%
c. 8.16%
d. 8.59%
e. 9.04%

Reference no: EM13568565

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