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Business, 05.05.2020 06:21 lucygperez9892

Assume the current 6-month spot rate is 1.5% and also assume that the 6-month spot rate next period can take the following two values with equal probability: 2.25% and 1.25% (the standard deviation is 0.5%). If local Expectations Theory holds, the current 12-month spot rate is . A. Larger than 2.25% B. Between 2% and 2.25% C. Smaller than 1.5% D. Between 1.5% and 2%

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Assume the current 6-month spot rate is 1.5% and also assume that the 6-month spot rate next period...
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