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Problem 1 (25 points) Suppose that risk-free zero interest rates with continuous compounding are as follows: Maturity ( years) Rate (% per annum) 3.0 5.0

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Problem 1 (25 points) Suppose that risk-free zero interest rates with continuous compounding are as follows: Maturity ( years) Rate (% per annum) 3.0 5.0 7.0 9.0 4 a) Calculate the forward interest rate that an investor could lock in today for a three- year investment made in one year. b) Calculate the forward interest rate that an investor could lock in today for a one- wear investment made in three years

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