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A bank loan department is trying to determine the correct rate for a 2-year loan to be made two years from now. If current implied
A bank loan department is trying to determine the correct rate for a 2-year loan to be made two years from now. If current implied Treasury effective annual spot rates are 1-year: 2.0%, 2-year: 3.0%, 3-year: 3.5%, and 4-year: 4.5%, what is the base (risk-free) forward rate for the loan before adding a risk premium?
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