Question: Given the Forward and Spot rates below what would the 3 year spot rate be? Draw it out first on a timeline 5.0% = 1-yr

  1. Given the Forward and Spot rates below what would the 3 year spot rate be? Draw it out first on a timeline
    1. 5.0% = 1-yr SPOT
    2. 4.40% = 1-yr FWD rate, 1-year forward (a 1-year rate that begins in 1-year)
    3. 4.00% = 1-yr FWD rate, 2-years forward
  2. If the 1-year spot rate is 3.5% and the 4-year forward rate, 1-year forward is 4.2%, then what is the 5-year spot rate?

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