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What is the one-year interest rate expected

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Question - The current interest rate on a one-year bond is 4 percent and the current rate on a two-year bond is 4.4 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 2? That is, compute the rate that is expected to exist only during Year 2.

a. 4.2%

b. 0.4%

c. 8.4%

d. 4.8%

e. 4.4%

Reference no: EM132732987

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