Question
A yield curve is defined as i t = 0.02 0.001t + 0.001t 2 where it is the annual effective rate of return for a
A yield curve is defined as
it = 0.02 0.001t + 0.001t2
where it is the annual effective rate of return for a zero-coupon bond that matures in t years. Calculate the 1-year forward rate, deferred for 4 years.
(A) 3.14%
(B) 4.00%
(C) 7.26%
(D) 9.10%
(E) 12.52%
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Public Finance A Contemporary Application Of Theory To Policy
Authors: David N Hyman
8th Edition
0324259700, 978-0324259704
