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Using Model 1, assume the current short-term interest rate is 5%, annual volatility is 80bps, and dW, a normally distributed random variable with mean 0 and standard deviation √dt, has an expected value of zero. After one month, the realization of dW is -0.5. What is the change in the spot rate and the new spot rate?
A
0.40% | 5.40%
B
-0.40% | 4.60%
C
0.80% | 5.80%
D
-0.80% | 4.20%