16. Bond A, a three-year 7% issue, currently sells for 964.3227. Bond B is a two-year 8%...
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16. Bond A, a three-year 7% issue, currently sells for 964.3227. Bond B is a two-year 8%
issue currently selling for 1010.031. Bond C is a three-year 6% issue currently selling for 938.4063. Based on this information, answer the following:
a. What are the one-, two-, and three-year spot rates of interest?
b. What are the one- and two-year forward rates on loans originating one year from now?
c. What is the one-year forward rate on a loan originated in two years?
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