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At your favorite bond store, Bonds-R-Us, you see the following prices: One year $100 zero selling for $90.10

Three-year10% coupon $1,000 par bond selling for $1,000

Two-year 10% coupon $1,000 par bond selling for $1,000 Assume that the expected theory for the term structure of interest rates holds, no liquidity premium exists, and the bonds are equally risky. What is the implied one-year rate two years from now?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9882043

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