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The current interest rate on the one-year bond is 5%. The 1-yr interest rates over the next four years are expected to be 6%,7%,8%, and

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The current interest rate on the one-year bond is 5%. The 1-yr interest rates over the next four years are expected to be 6%,7%,8%, and 9% (i.e. it+1e=6% ) Suppose it and it+1c increase both by 1 percent point ( 5% to 6%, and 6% to 7% respectively). Also, people have adjusted their expectation for the third year and now it+2e=5% According to the Expectations Theory, what is the change in the interest rate on a 3-yr bond? For example, if the initial interest rat is 5.42% and the new interest rate is 8.73%, the change is 3.31%. You would input 3.3 (round the nearest decimal, no \% symbol)

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