Question
Suppose the current 1-year rate is 2 percent. The market expects the 1-year rate to be 3 percent 1 year from now, and 5 percent
Suppose the current 1-year rate is 2 percent. The market expects the 1-year rate to be 3 percent 1 year from now, and 5 percent 2 years from now. According to the term structure formula, the current 3-year rate should be?
Was given correct answer is 3.326%, but unsure of how. Appreciate the help.
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Fundamentals Of Investments Valuation And Management
Authors: Bradford D Jordan, Thomas W. Miller Jr., Steven D. Dolvin
6th Edition
0073530719, 9780073530710
