Suppose the interest rate on a 1-year bond is 2.45% and that on a 2-year T-bond is 2.85%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now. Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places.
Answer choices:
A. 3.25%
B. 3.90%
C. 2.95%
D. 3.15%
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