Question: The current yield curve for default free zero coupon bonds is as follows: Maturity (years) Yield to Maturity 1 10% 2 11% 3 12% 4a)

The current yield curve for default free zero coupon bonds is as follows:

Maturity (years) Yield to Maturity
1 10%
2 11%
3 12%

4a) What is the one year forward rate, one year from today (ie the interest rate between years 1 and 2)?

  • 10%
  • 11%
  • 12%
  • 13%

4b) What is the one year forward rate, two years from today (ie the interest rate between years 2 and 3)?

  • 11.03%
  • 12.03%
  • 13.03%
  • 14.03%

4c) What is the two year forward rate, one year from today (ie the interest rate between years 1 and 3)?

  • 12.01%
  • 13.01%
  • 14.01%
  • 15.01%

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