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October 2nd, 2012, 11:40 AM  #1 
Newbie Joined: Dec 2011 Posts: 9 Thanks: 0  Finance
The government currently promises a return of 6% annually on a one year bond and 4% annually on a two year bond. What is your expectation for the interest rate you would receive on a one year government bond one year from now?

October 2nd, 2012, 11:48 AM  #2 
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Finance
1.04^2/1.061 or a little more than 2%.


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