Question
(fixed-income concept) Implied Forward Rate question: If you have two options to investment your $10,000: First one is an one-year Certificate of Deposit (CD) with
(fixed-income concept) Implied Forward Rate question: If you have two options to investment your $10,000: First one is an one-year Certificate of Deposit (CD) with simple annual interest rate of 1%; The second one is a two-year Certificate of Deposit (CD) with simple annual interest rate of 2% for year 1 and year 2. There are two questions:
- What is the implied one-year forward one-year CD rate?
- Which investment between the two do you prefer? Why?
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Analysis For Financial Management
Authors: Robert Higgins
7th Edition
0072863641, 9780072863642
