Question
Problem 2 ABC Pharmaceuticals' new rheumatoid arthritis drug recently passed phase III clinical trials. As the CFO, you plan to invest $100 million into a
Problem 2
ABC Pharmaceuticals' new rheumatoid arthritis drug recently passed phase III clinical trials. As the CFO, you plan to invest $100 million into a new drug launch in 2 years (after the FDA review process). To finance this project, you plan to borrow $100 million in 2 years for 1 year. You want to lock in an interest rate today. Suppose that the spot interest rates in the market today are as follows:
| Maturity (years) | Spot rate |
|---|---|
| 1 | 1% |
| 2 | 2% |
| 3 | 3% |
What is the fair interest rate (i.e., the forward rate) at which you can lock in your loan? (Note: Your answer should be a number in percentage form. Do not enter '%'
______%
Can You Help me Please???
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Investments Analysis and Management
Authors: Charles P. Jones
12th edition
978-1118475904, 1118475909, 1118363299, 978-1118363294
