Question: In the context of the previous problem you want to lock in the forward rate for the period between the year one and year three.

In the context of the previous problem you want to lock in the forward rate for the period between the year one and year three. How can you do that by trading in the one-year and the three-year bond?

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We would buy for example one unit of the threeyear pure discount bond and would sell short 85 96 ... View full answer

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