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Assume that an investor is risk-neutral (i.e. assume that the investor always chooses the investment with the higher expected rate of return even if it is riskier). If the yield on 1-year marketable CD's is 6% while the yield on 2-year marketable CD's is 7% and this investor purchased the 1year T-bill, what must (s)he expect to happen to short term interest rates over the coming year?

Microeconomics, Economics

  • Category:- Microeconomics
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