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Problem#1 Part A: Suppose that in the fixed-income securities market, the one-year and two-year spot interest rates are 10.000% and 8.500%, respectively. (That is, Ro,

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Problem#1 Part A: Suppose that in the fixed-income securities market, the one-year and two-year spot interest rates are 10.000% and 8.500%, respectively. (That is, Ro, 1 = 10.000% and R0.2 = 8.500%.] Then, as per the no-arbitrage principle, what is the current one-year forward rate one year from now? That is what is the (theoretical) value of FO, Theo 1.1 ? [Type your answer in numerical format, not in percentages. For example, if your answer is 1.234%, then type as 0.01234. You will not earn any credit if you type as 1.234 or 0.1234.]

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