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Suppose that the yield curve for government bonds shows that the one year bond yield is 5%, the two year bond yield is 4%, and

Suppose that the yield curve for government bonds shows that the one year bond yield is 5%, the two year bond yield is 4%, and the three year bond yield is 3%. Assume that the liquidity (term) premium on all three bonds is zero Based on this information what is the bond market currently expecting the one year interest rates next year to be Briefly explain.

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