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The 1-year spot rate on Treasuries is 4%. The 2-year spot rate is 10%. What is...

The 1-year spot rate on Treasuries is 4%. The 2-year spot rate is 10%. What is the implied forward rate between years 1 and 2?

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Answer #1

We see that the implied forward rate between years 1 and 2=1.10^2/1.04-1=16.346%

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