Suppose government economists have forecasted one-year T-bill rates for the following two years as follows:

Year 1-year rate 1 4.50% 2 5.00%

At what annual required rate of interest, bond investors would be willing to purchase a 2-year T-bond now?

Question 15 options:

9.725% or higher.

5.425% or lower.

4.75% or higher.

9.50% or lower.