Question: 6) 7) 8) Maturity Rate 1 year 3% 2 year 6% 5 year 7% 8 year 7% Based on the above spot rates what is

6) 7) 8) Maturity Rate 1 year 3% 2 year 6%

6) 7) 8) Maturity Rate 1 year 3% 2 year 6% 5 year 7% 8 year 7% Based on the above spot rates what is your forecast of the 1-year forward rate one-year from today? (Assume you are a proponent of market segmentation theory.) Based on the above spot rates what is your forecast of the 3-year forward rate ve years from today? Explain how the above answers would be impacted if you believed in the liquidity preference theory

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