Question: We know the forward rates for year 1 , year 2 , year 3 , and year 4 are 3 % , 2 . 5

We know the forward rates for year 1, year 2, year 3, and year 4 are 3%,2.50%,3%, and 4%, respectively. If the Law of One Price holds, what must the spot rate for a risk-free zero-coupon bond of 3-year maturity be?

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