21. Forward Interest Rates (LO3, CFA8) Consider the following spot interest rates for maturities of one, two,
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21. Forward Interest Rates (LO3, CFA8) Consider the following spot interest rates for maturities of one, two, three, and four years.
r 1 = 4.3% r 2 = 4.9% r 3 = 5.6% r 4 = 6.4%
What are the following forward rates, where f1,k refers to a forward rate for the period beginning in one year and extending for k years?
f 1,1 = ; f 1,2 = ; f 1,3 =
Hint: Use the equation (1 + r1)(1 + f1, k)k = (1 + rk+1)k+1 to solve for f1, k.
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Related Book For
Fundamentals Of Investments Valuation And Management
ISBN: 9781260013979
9th Edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
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