It Is April 1 And Your Mother Tells You That The Forward Rate For Year 2 I F 1 2

It is April 1 and your mother tells you that the forward rate for year 2, i.e. f1,2, is -5% (yes…negative!). You ask her about the current 1-year spot rate, which she informs you is 5%. Not having been born yesterday, you ask her to wait while you make a few calculations. Note that all yields are effective annual yields. Please include detailed steps and/or excel worksheet.

A.

Prof. Angela

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