Find market-s forecast for one-year rates one year from now


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%

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Finance Basics: Find market-s forecast for one-year rates one year from now
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