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These are the interest rates you observe in the market today: Maturity Spot Rates 1 year 3% 2 years 3.5% 3 years 4% 4 years

These are the interest rates you observe in the market today:

Maturity Spot Rates
1 year 3%
2 years 3.5%
3 years 4%
4 years 4.2%

Calculate what the market expects 2-year spot rates to be, exactly 2 years in the future?

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