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MaturityRate 1 year3% 2 year5% 4 year8% 10 year12% a.)Assume you are a proponent of the expectations hypothesis, what is your forecast of the 1-year

MaturityRate

1 year3%

2 year5%

4 year8%

10 year12%

a.)Assume you are a proponent of the expectations hypothesis, what is your forecast of the 1-year forward rate one-year from today?

b.) Assume you are a proponent of the expectations hypothesis, what is your forecast of the 2-year forward rate two years from today?(4 points)

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