14. You observe the following rnarket interest rates, for both borrowing and lending: One-year rate Two-year rate
Question:
14. You observe the following rnarket interest rates, for both borrowing and lending:
One-year rate Two-year rate 6%
One-year rate one year from now 7.25%
How Can you take advantage Of these races to earn a riskless profit? Assume that the pure expecta•
tions theory for interest rates holds.
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Related Book For 
Financial Markets and Institutions
ISBN: 978-0321280299
5th edition
Authors: Frederic S. Mishkin, Stanley G. Eakins
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