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A U.S. firm is currently analyzing the market conditions on interest rates for U.S. dollars (USD) and Euros (EUR): * The 1-year USD zero interest

A U.S. firm is currently analyzing the market conditions on interest rates for U.S. dollars (USD) and Euros (EUR): * The 1-year USD zero interest rate is 4% and the 2-year USD zero interest rate is 5% (with continuous compounding). * The 1-year EUR zero interest rate is 2% and the 2-year EUR zero interest rate is 3% (with continuous compounding). * The spot exchange rate is EUR 1=USD 1.05.

a. What is the implied forward 1-year interest rate for a year from now for USD?

b. What is the implied forward 1-year interest rate for a year from now for EUR?

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