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(c) Prices of zero-coupon bonds reveal the following pattern of interest rates: Years from now 1-year interest rate 0 5.2% 1 2 7.3% 8.6%
(c) Prices of zero-coupon bonds reveal the following pattern of interest rates: Years from now 1-year interest rate 0 5.2% 1 2 7.3% 8.6% Calculate: i) 3-year interest rate on today. ii) 1-year forward rate 3 years from now if 4-year interest rate on today is 7.8%. (10 marks)
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