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Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. Currently, the 2-year Treasury bond rate is 10.5% and the

Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. Currently, the 2-year Treasury bond rate is 10.5% and the 1-year Treasury bond rate is 12%. What does the market expect the 1-year Treasury bond rate one year from now will be?

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