Consider a two-year loan beginning in one year (A = 1, B = 3). The one-year spot

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Consider a two-year loan beginning in one year (A = 1, B = 3). The one-year spot rate is z1 = zA = 7% = 0.07. The three-year spot rate is z3 = zB = 9% = 0.09.

Interpret your answer to Problem 3.


Problem 3

Calculate the forward price of a two-year bond to be issued in one year: FA,B–A = F1,3.

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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