Question
You would like to know what the market expects the 1 year rate will be three years from now. You observe the following prices for
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You would like to know what the market expects the 1 year rate will be three years from now. You observe the following prices for pure discount, or zero-coupon, bonds:
| Maturity | Zero Coupon Bond Price |
| 1 | 95.8 |
| 2 | 86.2 |
| 3 | 84.6 |
| 4 | 72.6 |
What is the forward rate between year 3 and 4?
Please express your answer as a percent without the percentage sign so for 10.32% please enter 10.32]
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Financial Institutions And Markets
Authors: Jeff Madura
10th International Edition
0538482176, 9780538482172
