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The real risk-free rate of interest is 3 percent. Inflation is expected to be 2 percent this coming year, jump to 3 percent next year,
The real risk-free rate of interest is 3 percent. Inflation is expected to be 2 percent this coming year, jump to 3 percent next year, and increase to 4 percent the year after (Year 3). According to the expectations theory, what should be the interest rate on 2-year, risk-free securities today? 5.50% 5.60% 5.70% 5.80% 5.90%
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