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Suppose the interest rate on a 1-year T-bond is 1.60% and that on a 2-year T-bond is 2.80%. Assume that the pure expectations theory is
Suppose the interest rate on a 1-year T-bond is 1.60% 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 0.30% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now
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The Finance Book
Authors: Stuart Warner, Si Hussain
2nd Edition
1292401982, 978-1292401980
