Problem 2: Suppose the interest rate on a 1-year T-bond is 5.00\% and that on...
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Problem 2: Suppose the interest rate on a 1-year T-bond is 5.00\% and that on a 2-year T-bond is 6.40\%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40\% for a 2-year bond. What is the yield on a 1-year T-bond expected to be one year from now? Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places
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Problem 2: Suppose the interest rate on a 1-year T-bond is 5.00\% and that on a 2-year T-bond is 6.40\%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40\% for a 2-year bond. What is the yield on a 1-year T-bond expected to be one year from now? Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places 