Question: Spot rate for maturity ranging from 1-6 years are shown in the table below: Maturity Spot Rate 1 4.0% 2 4.25% 3 4.75% 4

Spot rate for maturity ranging from 1-6 years are shown in the table below:

 

MaturitySpot Rate
14.0%
24.25%
34.75%
45.25%
56.0%
66.55%

 

  1. 1) What is today's 1- year forward rate at the end of the year 5? In another words, what is r5,6?
  2. 2) What is today's 2 year forward rate at the end of year 3? In another words, what is r3,5?

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