1. Problem 6.08 (Expectations Theory)

BA

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Interest rates on 4-year Treasury securities are currently 6.1%, while 6-year Treasury securities yield 8.05%. If the pure expectations theory is correct, what does the market believe that 2-year

securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.

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