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Assume the one-year spot rate is 4 percent, the two-year spot rate is 4.5 percent, and the three-year spot rate is 5 percent. Which of the following statements is TRUE? A. The one-year rate that will exist one year from today is 5.5 percent. B. The one-year rate that will exist two years from today is 5 percent. C. The two-year rate that will exist one year from today is 5.5 percent. D. The rate that an investor can earn on a sum invested today for the next three years is 5.5 percent. |