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Yazan wants to invest in a market with a variety of spot rates and forward rates available. If at time t = 0, he invests
Yazan wants to invest in a market with a variety of spot rates and forward rates available. If at time t = 0, he invests RM 1,000 for 2 years, Yazan will then receive RM 1,118 at time t = 2. Alternatively, if at time t = 0, he agrees to invest RM 1,000 at time t = 1 for two years and he will receive RM 1,140 at time t = 3. However, if at time t = 0 he agrees to invest RM 1,000 at time t = 1, for one year, he will then receive RM 1,058 at time t = 2. Calculate the following spot rates: i) The one-year spot rate at time t = 0 ii) The two-year spot rate at time t = 0 The three-year spot rate at time t = 0
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