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QUESTION 7 Suppose that the spot interest rate on a one-year zero-coupon bond is 1% and the spot interest rate on a two-year zero-coupon bond

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QUESTION 7 Suppose that the spot interest rate on a one-year zero-coupon bond is 1% and the spot interest rate on a two-year zero-coupon bond is 2%. If you expect the one-year interest rate starting in one year to be 1%, what is the optimal investment strategy for a two-year investment? a. Buy a two-year bond b. Buy a one-year bond and plan to buy a second one-year bond next year

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