What rate of interest should you expect during second year

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Reference no: EM131314361

Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 2-year Treasury bond is 10 percent and the rate on a 1-year Treasury bond is 12.5 percent, what rate of interest should you expect during the second year?

Reference no: EM131314361

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