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Level II
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Fixed Income
Fixed Income
Medium
The current spot rates are: 1-year at 3.0%, 2-year at 3.5%, and 3-year at 4.2%. Based on the pure expectations hypothesis, what is the 1-year forward rate two years from now (f(2,1))?
A
5.61%
B
4.90%
C
4.20%
D
3.50%
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Tags
#term-structure
#forward-rates
#expectations-hypothesis
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