My crystal ball predicts the one year rates will be: 6.930% today 5.180% in one year 8.020%

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My crystal ball predicts the one year rates will be:

6.930% today
5.180% in one year
8.020% in two years
7.850% in three years
2.290% in four years

If the yield curve is formed solely from expectations, then the three-year rate today must be?

Related Book For answer-question

Principles of Finance

ISBN: 978-1285429649

6th edition

Authors: Scott Besley, Eugene F. Brigham

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Posted Date: Apr 19, 2023 10:37 PM

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My crystal ball predicts the one year rates will be: 6.930% today 5.180% in one year 8.020%

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Expert Answer:

To calculate the threeyear rate today we can use the concept of forward rates A forward rate is the ... View the full answer

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