Question: a one year zero coupon bond with $100 face value is currently trading for $98. the forward rate for borrowing money one year from now

a one year zero coupon bond with $100 face value is currently trading for $98. the forward rate for borrowing money one year from now for another year is 6%. compute the arbitrage free two year spot rate.

a) 2.04%

b) 4.98%

c) 6%

d) 10.2%

e) none of the above

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