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PROBLEM 1 (20 pts): Given the following spot rates: 1?year CD: 3% 2?year CD: 4% 3?year CD: 4.5% 4?year CD: 4.9% 5?year CD: 5.5% Compute

PROBLEM 1 (20 pts): Given the following spot rates: 1?year CD: 3% 2?year CD: 4% 3?year CD: 4.5% 4?year CD: 4.9% 5?year CD: 5.5% Compute the rate on 1 year CDs four years forward. State your answer as a percentage with 3 digits after the decimal point.

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