The current 24 × 60 forward rate is 4% p.a. s.a.; the current 5-year zero rate is 6% p.a. s.a. What is the implied 2-year zero rate? 

 

(b) What do the 2-year and 5-year zero rates in (a) imply about the well-being of the economy going forward? Very briefly Explain. 

 

(c) IBM is currently selling at $100/share. The 3-month single stock futures price on IBM is $101. 

Assuming that IBM will not pay any dividends during the next 3 months and the company is subject to zero short-selling pressure (stock lending fee is zero), can we say that, based on the the stock is expected to rise by 1% over the next three months?

Answer rating: 100% (QA)

To calculate the implied 2year zero rate we can use the formula for calculating the present ... View the full answer