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Annualized Interest Rates

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a) Assume that as of today, the annualized two-year interest rate is 13%, while the one-year inters rate is 12%. Use only this information to estimate the one-year forward rate.
b) Assume that the liquidity premium on a two-year security is 0.3% use this information to re-estimate the one-year forward rate.

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This solution provides calculations for annualized interest rates.

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