Suppose you are provided with the following table of spot rates of different maturity bonds: Year Spot rate 1 8 2 9 3 7 4 8 5 10 Calculate, respectively, one period forward rates of these bonds for year 2, year 3 and year 4.

Suppose you are provided with the following table of spot rates of different maturity bonds: Year Spot rate 1 8 2 9 3 7 4 8 5 10 Calculate, respectively, one period forward rates of these bonds for year 2, year 3 and year 4.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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Question

Suppose you are provided with the following table of spot rates of different maturity bonds:

Year	Spot rate
1	8
2	9
3	7
4	8
5	10

Calculate, respectively, one period forward rates of these bonds for year 2, year 3 and year 4.

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Calculation of One Period Forward Rate for Year 2:

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Calculation of One Year Forward Rate for Year 3:

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Calculation of One Year Forward Rate for Year 4:

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