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The Current Required Yields on One- and Two-Year Government Bonds

Question 64

Multiple Choice

The current required yields on one- and two-year government bonds are i1 = 12 per cent and i2 = 13 per cent. What are the market's expectations of the one-year forward rate, f1 (round to two decimals) ?


A) 13.50 per cent
B) 14.00 per cent
C) 14.50 per cent
D) 15.00 per cent

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