Question
Today the yield on a 1-year T-Bill is 6.0% and on a 3-year zero-coupon bond is 7.0%. The forward rate in year 2 is 6.8%.
Today the yield on a 1-year T-Bill is 6.0% and on a 3-year zero-coupon bond is 7.0%. The forward rate in year 2 is 6.8%. What should be the forward rate in year 3?
A. 8.2%
B. 8.4%
C. 8.6%
D. 8.9%
E. None of the options are correct.
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Fundamentals of Investments Valuation and Management
Authors: Bradford D. Jordan, Thomas W. Miller
5th edition
978-007728329, 9780073382357, 0077283295, 73382353, 978-0077283292
