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A 1-year spot rate is 5% today. If the expected future 1-year spot rate from 2...

  1. A 1-year spot rate is 5% today. If the expected future 1-year spot rate from 2 years from now is 6%, what is the possible forward rate between year 2 and year 3? Assume the Expectations Hypothesis holds.

    A. 4%
    B. 5%
    C. 6%
    D. 7%
    E. None of the above

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