r0, 3 was computed in the text as 8.80%. The 4-year holding rate of return is r0,

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r0, 3 was computed in the text as 8.80%. The 4-year holding rate of return is r0, 4

≈ 1.0314 ≈ 12.99%. Therefore, the 1-year forward rate from year 3 to year 4 is r3, 4

= (1 + r0, 4)/(1 + r0, 3) − 1 ≈ (1 + 12.99%)/

(1 + 8.80%) − 1 ≈ 3.85%.

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Corporate Finance An Introduction

ISBN: 9780321277992

1st Edition

Authors: Ivo Welch

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Question Posted: Oct 25, 2024 08:01 AM

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r0, 3 was computed in the text as 8.80%. The 4-year holding rate of return is r0, 4 1.0314 12.99%. Therefore, the 1-year forward rate from year 3 to year 4 is r3, 4 = (1 + r0, 4)/(1 + r0, 3) 1 (1...
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r0, 3 was computed in the text as 8.80%. The 4-year holding rate of return is r0,

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Corporate Finance An Introduction

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