Question: * Will rate for a step by step solution. Thank you!* (1 pt) Let s1 0.05 ( that is, 5 percent) be the rate for

 * Will rate for a step by step solution. Thank you!*

* Will rate for a step by step solution. Thank you!*

(1 pt) Let s1 0.05 ( that is, 5 percent) be the rate for money to be lent starting now, for a period of one year. Let s2 0.06 (that is, 6 percent) be the rate for money to be lent starting now, for a period of two years. Let f1,2 be the foward rate for money to be lent from one year from now, to two years from now. Assume annual compounding Consider two alternative methods of investing 1000 dollars: (1) Place the funds in a two-year account (i.e. lend to a bank for two years starting now).Then in two years, the funds will be worth (i) Place the funds first in a one-year account, then after one year lend the resulting funds for a period of one year, at a forward rate 1,2 In two years, the funds will be worth (1 +,2) Assuming these two alternative investments produce the same value, the forward rate for money to be lent from one year from now to two years from now, is 1,2 =

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