Question

Consider the following spot rate curve: 6-month spot rate: 6%. 12-month spot rate: 11%. 18-month spot...

Consider the following spot rate curve: 6-month spot rate: 6%. 12-month spot rate: 11%. 18-month spot rate: 14%. What is the forward rate for a 6-month zero coupon bond issued one year from today? Equivalently, the question asks for f12, where 1 time period consists of 6 months. Remember, like spot rates, forward rates are expressed as bond-equivalent yields.

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Answer #1

Solutiou T6hg (+ 0.14 6 wo.thsuod Fde ive 1 year +0.11) 21718 0.096S58Y 9.6558 9.6558 -

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