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Has the bank set the 5-year rate correctly

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A commercial bank made a 5-year term loan at 13 percent. The bank"s economics department forecasts that 1 and 3 years in the future the 2-year interest rate will be 12 percent and 14 percent, respectively. The current 1-year rate is 7 percent. Given that the bank"s forecasts are reliable, has the bank set the 5-year rate correctly?

Reference no: EM13321255

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