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Computing the rate of interest

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Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 2-year Treasury bond is 11.8 percent and the rate on a 1-year Treasury bond is 13.3 percent, what rate of interest should you expect on a 1-year Treasury bond one year from now?

Reference no: EM133068521

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