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Given the Yield on a 3-Year Zero-Coupon Bond Is 7

Question 7

Multiple Choice

Given the yield on a 3-year zero-coupon bond is 7% and forward rates of 6% in year 1 and 6.5% in year 2, what must be the forward rate in year 3?

A) 7.2%
B) 8.6%
C) 8.5%
D) 6.9%

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