Question: Maturity 1 2 3 4 5 6 Spot Rate 4.0% 4.25% 4.75% 5.25% 6.0% 6.75% Calculate the 1-year forward rate as quoted today (year

Maturity 1 2 3 4 5 6 Spot Rate 4.0% 4.25% 4.75% 5.25% 6.0% 6.75% Calculate the 1-year forward rate as quoted today (year

Maturity 1 2 3 4 5 6 Spot Rate 4.0% 4.25% 4.75% 5.25% 6.0% 6.75% Calculate the 1-year forward rate as quoted today (year zero) for years 1, 2, 3, 4 & 5. Show each of the spot and forward rates on the time-line below. (For simplicity, you can use annual compounding.) -ro,1 .I. 1,2 -0,2 2 0,3 Forward Rate 3 0,4------ 4,5 LO 5 5,6---- 0,6------ 1 Calculate the 4-year forward rate as quoted today (year zero) in year 1. Show the 4-year forward rate on a timeline. 2 3 1 4 5 6

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