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3. Relation between spot and discount rates
Suppose the spot rates for 1 and 2 years are $1 = 6.3% and s, = 6.9% with annual
compounding. Recall that in this course interest rates are always quoted on an annual basis
unless otherwise specified. What is the discount rate d(0, 2)?
Please submit your answer rounded to three decimal places. So, for example, if your
answer is 0:4567 then you should submit an answer of 0:457.
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