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Suppose the following interest rates are given: one-year spot rate, y, is 4% two-year spot rate, y2, is 6% forward rate from year one to
Suppose the following interest rates are given: one-year spot rate, y, is 4% two-year spot rate, y2, is 6% forward rate from year one to year three, its, is 12% forward rate from year two to year four, 2a, is 16% Which one of the followings is closest to arbitrage-free four-year spot rate? (Please round your calculation to the nearest 2nd decimal, i.e., percentage point.) Select one: A. 11% B. 10% ?. 9% E. 7%
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