Expected one-year interest rate


Problem:

Suppose the yield on a two-year treasury bond is 5 percent and the yield on a one-year treasury bond is 4 percent. If the maturity risk premium on these bonds is zero,

Required:

Question: What is the expected one-year interest rate during the second year?

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics: Expected one-year interest rate
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