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Suppose that you observed the following term structure for Treasury securities: Maturity Yield 1 year 16.0% 2 years 16.2% 3 years 16.4% 4years 16.5% 5

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Suppose that you observed the following term structure for Treasury securities: Maturity Yield 1 year 16.0% 2 years 16.2% 3 years 16.4% 4years 16.5% 5 years 16.5% Assume that the pure expectations theory of the term structure is correct. What does the market expect will be the interest rate on 2-year securities 3 years from now? o 6.4% 6.65% o 6.85% 67%

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