Estimate the expected interest rate on a one-year security

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Suppose the interest rate on a two-year security is 3.5%.

Assume the interest rate on a one-year security is 3.8%.

Assume there is a .25% term premium.

Estimate the expected interest rate on a one-year security next year? Please show work for studying use.

On another note, is this question interchangeable with "estimate the expected one-year forward rate for year 2?"

Reference no: EM131016171

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