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The one-year spot rate is currently 4 percent; the one-year spot rate one year from now will be 3 percent; and the one-year spot rate

The one-year spot rate is currently 4 percent; the one-year spot rate one year from now will be 3 percent; and the one-year spot rate two years from now will be 6 percent. Under the unbiased expectations theory, what must today's three-year spot rate be? Suppose the three-year spot rate is actually 3.75 percent, how could you take advantage of this? Explain.

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