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Assume that liquidity and maturity risk premiums are zero. The annual interest rate on a two-year Treasury bond is 10 percent, whereas the annual interest

Assume that liquidity and maturity risk premiums are zero. The annual interest rate on a two-year Treasury bond is 10 percent, whereas the annual interest rate on a one-year Treasury bond is 12 percent. Assuming the expectations theory is correct, what would the interest rate be on a one-year Treasury bond one year from now?

10%

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