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3. Year Interest rate Forward rate 10% 18% 2 3 10.00% ( 13.28% 1) Figure out the 2-year interest rate based on the Expectations Hypothesis.

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3. Year Interest rate Forward rate 10% 18% 2 3 10.00% ( 13.28% 1) Figure out the 2-year interest rate based on the Expectations Hypothesis. (20points) 2) Figure out the Year-3 forward rate based on the Expectations Hypothesis. (20points)

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