Today, you observe the following spot rates:

Maturity (years)	Spot rate
0.5	4.0%
1	4.3%
1.5	5.1%
2	5.5%

(All rates are annualized on a semi-annual bond equivalent yield basis and so should be your answers)

What is the 1-year rate the market expects six months from now? (hint: it is a forward rate):

Enter the result in percentage points (For example, if you find 10.00% or 0.1, write 10 as the answer), round your answer to 2 decimal points

Answer rating: 100% (QA)

To determine the 1year rate the market expects six months from now we can use the concept of forward ... View the full answer