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Estimate the one-year forward rate

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Reference no: EM132912316

Problem -

a. Assume that, as of today, the annualized two-year interest rate is 13 percent and the one-year interest rate is 12 percent. Use this information to estimate the one-year forward rate.

b. Assume that the liquidity premium on a two-year security is 0.3 percent. Use this information to estimate the one-year forward rate.

Reference no: EM132912316

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