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2. You observe the following rates: One year spot: 4% Two year spot: 5% In addition, you observe a risk-free three-year bond with 5% annual

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2. You observe the following rates: One year spot: 4% Two year spot: 5% In addition, you observe a risk-free three-year bond with 5% annual coupon payments (paid once each year) and a $100 face value trading at a price of $98.1296. Compute the three year spot rate

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