Question: Answer: (a) 0.007, (b) 5.5% Problem 53.7 You are given the following yield curve Length of investment Interest Rate 1 0.040 2 0.045 3 0.048

Answer: (a) 0.007, (b) 5.5% Problem 53.7 You are given the following Answer: (a) 0.007, (b) 5.5%

Problem 53.7 You are given the following yield curve Length of investment Interest Rate 1 0.040 2 0.045 3 0.048 4 0.050 5 0.051 (a) Calculate the 2 year deferred 3 year forward rate less the three year spot rate. (b) Calculate what the 3 year spot rate is expected to be in 2 years

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