Liquidity and aturity risk premiums are zero

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Assume that the expectations theory holds, and that liquidity and aturity risk premiums are zero, If the annual rate of interest on a 2year Treasury bond is 10.5% and the rate on a 1-yearTreasury ond that is issued today is 12% , What rate of interes should your expect on 1-year Treasury bond issued one year from now?

Reference no: EM131178710

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