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1. If the pure expectations theory holds, what does the market expect will be the interest rate (expected return rate)on one-year securities, three years from

1.If the pure expectations theory holds, what does the market expect will be the interest rate (expected return rate)on one-year securities, three years from now? (1year maturity yield is 6.0%;2year maturity yield is 6.1%;3year maturity yield is 6.3%;4year maturity yield is 6.3 %;5year maturity yield is 6.3%)? (Hints: Draw the timeline and then calculate the interest rate(expected return rate) on two-year securities, two years from now.)

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