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According to the expectations theory , the market rate for any period to maturity can be express as an average of the current rate and
According to the expectations theory, the market rate for any period to maturity can be express as an average of the current rate and the applicable forward rates. Assume that the current 1-year interest rate is 6.4%, the one-year forward rate one year from now is 7.25% and the one-year forward rate two years from now is 7.8%. What would the rate for a 3-year bond be?
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