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Question 8 Suppose we observe the following rates: 1 R 1 = 6 % , 1 R 2 = 8 % . If the unbiased

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8

Suppose we observe the following rates:

1 R 1 = 6 %, 1 R 2 = 8 % .

If the unbiased expectations theory of the term structure of interest rate holds, what is the cte

-

year interest rate expected one year from now,

E (2 r 1) ?

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