A new one-year bond pays interest of 1.04%.A new two-year bond pays interest of 1.46%.Using expectations theory of term structure and assuming the market is in equilibrium,what interest rate does the market expect a new one year bond to have one year from now?
A) 0.42%
B) 1.18%
C) 1.25%
D) 1.88%
Correct Answer:
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