Question
Assume today is 12/31/2022 and you observe this yield curve. Maturity Spot 1 3.75% 2 3.88% 3 3.95% 4 4.00% 5 4.13% 6 4.50% Replicate
Assume today is 12/31/2022 and you observe this yield curve.
| Maturity | Spot |
| 1 | 3.75% |
| 2 | 3.88% |
| 3 | 3.95% |
| 4 | 4.00% |
| 5 | 4.13% |
| 6 | 4.50% |
Replicate the 6-year bond with 2 3-year bonds. In other words, instead of buying the 6-year bond earning 4.5% interest, I want to buy one 3-year bond paying 3.95% interest and another 3-year bond. What would be the rate for that 3-year bond starting 3 years from now? You need to calculate the Forward rate F3x6
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
