Exercise 23.2.6 (1) Based on the sample term structure and its associated binomial interest rate tree in

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Exercise 23.2.6 (1) Based on the sample term structure and its associated binomial interest rate tree in Fig. 23.8, what is the next baseline rate if the four-period spot rate is 4.4%? (2) Confirm Theorem 23.2.2 by demonstrating that the baseline rate produced by Eq. (23.4) is smaller than the one derived in (1).

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