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0 Assume the following rates are currently observable: Current 1-year spot rate ( 1R 1) = 6%; 1-year spot rate one year from now (
0 Assume the following rates are currently observable: Current 1-year spot rate ( 1R 1) = 6%; 1-year spot rate one year from now ( 2R 1) = 7% o 1-year spot rate two years from now ( 3R 1) = 8% o Under the Unbiased Expectations Theory (UET) what must today's three year spot rate (1R 3) be? Show clearly all work, carrying all calculations out to four (4) decimal places. Highlight in bold your answer. (5 pts)
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