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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