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If the nominal rate of interest on 1-year bonds is 5

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Assume that the real risk-free rate is 2 percent and that the maturity risk premium is zero. If the nominal rate of interest on 1-year bonds is 5 percent and that on comparable risk 2-year bonds is 7 percent, what is the 1-year interest rate that is expected for year two?

Reference no: EM13479392

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