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1-year T-bill rates are expected to steadily increase by 150 basis points per year over the next 2 years. Determine the required interest rate on
1-year T-bill rates are expected to steadily increase by 150 basis points per year over the next 2 years. Determine the required interest rate on a 3-year T-bond if the current 1-year interest rate is 7.5%. Assume that the Pure Expectations Hypothesis for interest rates holds. Please remember to show your work and use any applicable formulas by hand.
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