Question: Given the yield on a 3-year zero-coupon bond is 7.5% and forward rates of 6.25% in year 1 and 7% in year 2, the forward

Given the yield on a 3-year zero-coupon bond is 7.5% and forward rates of 6.25% in year 1 and 7% in year 2, the forward rate in year 3 is most likely?

a) 8.1%

b) 9.9%

c)8.6%

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