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How could you explain the fact that the observed market


Given the following Treasury yields, what should the yield be on a four-year note?

1 year                                      1%

1 year yield in 1 year              2%

1 year yield in 2 years            4%

1 year yield in 3 years            5%

How could you explain the fact that the observed market yield on a four-year note is 3.5% instead of the yield that you found above?

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Business Management: How could you explain the fact that the observed market
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