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A. Calculate the following interest rate: find 0r3 given 0r1 is 5.2% and 2r3 is 5%. B.Calculate the following interest rates: calculate the implicit forward

  1. A. Calculate the following interest rate: find 0r3 given 0r1 is 5.2% and 2r3 is 5%. B.Calculate the following interest rates: calculate the implicit forward rate (1r2) given the one period spot rate (0r1) is 6.7% pa and the two-period spot rate (0r2) is 7% pa.
  2. B. Suppose an investor hold a 1:4 FRA and interest rates fall unexpectedly. Explain the value of the FRA to the investor, and how a FRA can be viewed as a derivative. C. Explain how a borrower could use FRA contract to hedge the interest rate risk posed a bill facility.

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