Question: Suppose the interest rate on a 1-year bond is 4% and that on a 2 year T-bond is 4.5%. Assuming the pure expectation theory is

Suppose the interest rate on a 1-year bond is 4% and that on a 2 year T-bond is 4.5%. Assuming the pure expectation theory is correct, what is the market's forecast for 1-year forward rate one year from now?

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