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Recall that on a one-year Treasury security the yield is 4.9200% and 6.6420% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.5%. What is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

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Answer:

The attached file will help to understand the answer well.

Explanation:

Recall that on a one-year Treasury security the yield is 4.9200% and 6.6420% on a-example-1
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