Homework Answers
One year interest rate in year 3 = ((1 + R3)^3 / (1 + R2)^2) - 1
= ((1 + 0.022)^3 / (1 + 0.016)^2) - 1
= (1.0675 / 1.0323) - 1
= 1.034 - 1
= 0.034 Or 3.4%
One year interest rate in year 3 = 3.4%
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