As a portfolio manager you need to make decisions about how to invest funds. A client tells you they will need their funds in 3 years. You could decide to invest in a 3-year bond or you could invest in a shorter maturity bond then reinvest the funds in the future into another bond. If you chose to invest the funds a 2-year security then reinvest the funds into a 1-year security 2 years from now, what must be the forward rate on the 1-year security? Maturity Spot rate 1 year 5% 2 years 5.5% 3 years 6% O 73% O 6.4% O 7.996 7.0% Next