r0, 5 = 1.03355 1 17.91%. Therefore, 1 + r3, 5 = 1.03355/1.02853 1
Question:
r0, 5
= 1.03355 − 1 ≈ 17.91%. Therefore, 1 + r3, 5
= 1.03355/1.02853 − 1 ≈ 8.38%, which is
√
1.0838 −
1 ≈ 4.10% in annualized terms.
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