Question

Suppose that today’s annual market interest rates are 2.5% for a 2-year deposit/loan, 3.5% for a 3-year deposit/loan, and 4.5% for a 4-year deposit/loan. What is the forward interest rate for a 2-year deposit in 2-year’s time. (Use six decimals for your computations)

A) 3.50000%

B) 2.00000%

C) 6.03921%

D) 7.06127%

E) 6.5390%

Answer 1

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C w ? ENG 02:02 31-07-2020 99+ 28 Х EV1224 > . ET EU EV EW EX EY EZ FA FB FC FD FE 2 YEAR FORWARD RATE 2 YEARS FROM NOW 4f2 = ((1+1R4)^4/(1+1R2)^2)^(1/2) -1 = ((1+0.045)^4/(1+0.025)^2)^(1/2) -1 = 6.5390% 1208 1209 1210 1211 1212 1213 1214 1215 ANS : E 1216 1217 1218 1219 1220 1221 1222 1223 1224 1225 1226 1227 1228 1229 1230 1231 YIELD SPOT AFN BANKING NOTE Sheet2 S1 S3 CLEAN zinn S10 BIDDING, UNDERWRITING TABLE SEMI QUARTER ZERO COUP ...