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What is the equilibrium market forecast for 1-year rates 1

Question: Suppose the interest rate on a 1-year T-bond is 3.25% and that on a 2-year T-bond is 4.75%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.4% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now?

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Finance Basics: What is the equilibrium market forecast for 1-year rates 1

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Finance Basics: What is the equilibrium market forecast for 1-year rates 1

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