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The current 2-year spot rate is 4% and current 5-year spot rate is 5.5%. According to the pure expectation theory of the term structure of
The current 2-year spot rate is 4% and current 5-year spot rate is 5.5%. According to the pure expectation theory of the term structure of interest rates, what is the forward rate for 1-year securities beginning three years from today?
A) 6.44%
B) 7.79%
C) 8.23%
D) 9.58%
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