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Currently, the one-, two-, three-, four year and five- spot interest rates for zero-coupon government bonds are 3.50%, 3.80%, 4.10%, 4.50% and 4.80%. If the
Currently, the one-, two-, three-, four year and five- spot interest rates for zero-coupon government bonds are 3.50%, 3.80%, 4.10%, 4.50% and 4.80%. If the expectations theory holds, and liquidity and maturity risk premiums are zero, what will be the implied three-year interest rate beginning two years from now?
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