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Assume that the forward rate two years from now for the next one year period (i.e. from year 2 to year 3) is 5%. Assuming

Assume that the forward rate two years from now for the next one year period (i.e. from year 2 to year 3) is 5%. Assuming that interest rate volatility is 13% , provide your best guess for the 4 possible binomial tree rates (Hint: two - rHL and rLH are the same) .

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