You are given the following information: the one-year spot rate is 6.50%, the forward rate f(1,2) is
Question:
You are given the following information: the one-year spot rate is 6.50%, the forward rate f(1,2) is 7.50%, and the forward rate f(1,3) is 9%. All rates are expressed in continuously compounded terms.
(a) What are the two- and three-year spot rates?
(b) What is the forward rate f (2,3)?
(c) What are the discount function values for one-, two-, and three-year maturities?
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