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Assume that the 1-year rate is 7% and the 2-year rate is 10%. Based on the expectations theory, what is the implied 1-year rate, 1

Assume that the 1-year rate is 7% and the 2-year rate is 10%. Based on the expectations theory, what is the implied 1-year rate, 1 year from today?

A. 7%.

B. 10%.

C. 12%.

D. 13%.

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