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Suppose the interest rate on a 1-year T-bond is 1.45% and that on a 2-year T-bond is 2.80%.Assume that the pure expectations theory is NOT

Suppose the interest rate on a 1-year T-bond is 1.45% and that on a 2-year T-bond is 2.80%.Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.20% for a 2-year bond.What is the equilibrium market forecast for 1-year rates 1 year from now?

a.2.3500%

b.3.0565%

c.3.7630%

d.4.1500%

e.4.5275%

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