8.suppose that spot interest rates with different maturities are shown below:

Maturity (years) Rate (%)

1 2.8

2 3.0

3 3.2

What is the forward rate for the third year (i.e., what is the one-year interest rate between year 2 and year 3), using approximation?

1. 3.00%
2. 3.20%
3. 3.40%
4. 3.60%
5. 3.80%