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Suppose that the yield on a two-year Treasury security is 5.84%, and the yield on a five-year Treasury security is 6.78%. Assuming that the pure
Suppose that the yield on a two-year Treasury security is 5.84%, and the yield on a five-year Treasury security is 6.78%. Assuming that the pure expectation theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? The error margin will allow either arithmetic or geometric averaging on this question.
Your answer should be between 5.58 and 7.98
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