Question
The following table lists the annual spot rates for the next 4 years: Time (years) Rate (%) 1 2.37 2 3.93 3 4.02 4 6.00
The following table lists the annual spot rates for the next 4 years:
| Time (years) | Rate (%) |
| 1 | 2.37 |
| 2 | 3.93 |
| 3 | 4.02 |
| 4 | 6.00 |
An investor buys a 5.26% coupon 4 year annual-pay risk-free bond and holds it to maturity. Assuming that one year forward rates become realized as future spot rates, what is the expected annualized rate of return to the investor?
Enter answer in percents.
Correct answer: 6
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Handbook Of Modeling High Frequency Data In Finance
Authors: Frederi G. Viens, Maria Cristina Mariani, Ionut Florescu
1st Edition
