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Suppose the interest rate on a 1-year zero-coupon bond is currently 12% and is expected to fall to 6% in one year and then stay
Suppose the interest rate on a 1-year zero-coupon bond is currently 12% and is expected to fall to 6% in one year and then stay there for a long time. Then according to the pure expectations hypothesis of the term structure, the current interest rate on a 2-year zero-coupon bond should be approximately _____ and the current interest rate on a 3-year zero coupon bond should be approximately _____.
Group of answer choices
A. 9.0, 8.0
B. 6.0, 6.0
C. 12.0, 9.0
D. 9.0. 6.0
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