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You observe that the 6-month spot rate is 3%, the 1-year spot rate is 3.5%, and the 2-year spot rate is 4.2%. Under the pure

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You observe that the 6-month spot rate is 3%, the 1-year spot rate is 3.5%, and the 2-year spot rate is 4.2%. Under the pure expectation theory of the term structure, what can you say about investors' expectation of future rates? Cannot be determined Rates must be lower in the future Rates must be higher in the future Rates must be the same in the future

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