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QUESTION
Suppose the interest rate on a 1-year T-bond is 5.2% and that on a 2-year T-bond is 6.
Suppose the interest rate on a 1-year T-bond is 5.2% and that on a 2-year T-bond is 6.3%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now?
