Question $45(2$ points$)$

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Assume that in $2019$ nominal interest rate on a one year bond is $2\%$ and in $2020$ it is expected to be $4\%$ and the risk premium on the bond is $0\mathrm{.}03\%.$ Based on the "expectations theory" in $2019$ interest rate on a two year bond should be$,$

$6\%$

$4\%$

$4\mathrm{.}03\%$

$3\%$