Question
Namibias Treasury Bills represent a significant proportion of most portfolios of financial institutions. On realizing this fact, you have decided to analyse the yield curve
- Namibias Treasury Bills represent a significant proportion of most portfolios of financial institutions. On realizing this fact, you have decided to analyse the yield curve for treasury bonds. The following table provides the necessary data:
| Year to maturity | Par coupon yield to maturity (%) | Calculated spot rates (%) | Calculated forward rates (%) |
| 1 | 6.00 | 6.00 | 6.00 |
| 2 | 7.2 | 7.21 | 7.42 |
| 3 | 8.00 | ? | ? |
a) Using the data in the table above, calculate the three-year spot rate and the three years forward rate, assuming annual compounding. [4]
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
