What is the annual interest rate on a two-year loan

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Unbiased Expectations Theory Suppose we observe the following rates: the interest rate for the next year is 6% and the one-year interest rate expected one year from now is 9%. What is the annual interest rate on a two-year loan?

7.5%

8.5%

9.0%

15.5%

Reference no: EM13875940

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