Solutions to Quiz 2 are after the questions
The first strategy locks in the two year rate of 7.5% per year. So the two year return will be equal to (1.075)2. The second strategy will earn 6% in the first year and then reinvest at the one year interest rate that will be available one year from today (let’s call it r). So the two year return will be (1.06)*(1+r) ................
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