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Difference between the 1-year interest rate expected

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Assume that the current interest rate on a 1-year bond is 8 percent, the current rate on a 2-year bond is 14.1 percent, and the current rate on a 3-year bond is 12.1 percent. If the expectations theory of the term structure is correct, what is the difference between the 1-year interest rate expected during Year 3 and the current one year rate?

Reference no: EM133069666

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