You observe the following term structure of interest rates (zero-coupon yields, also called "spot rates"). The spot rates are annual rates that are semi-annually compounded.
Time to MaturitySpot Rate
0.52.00%
1.03.00%
1.53.50%
2.03.00%
2.54.00%
3.04.50%
Compute the six-month forward curve, i. e. compute f(0,0.5,1.0), f(0,1.0,1.5), f(0,1.5,2.0), f(0,2.0,2.5), and f(0,2.5,3.0). Round to six digits after the decimal. Enter percentages in decimal form, i. e. enter 2.1234% as 0.021234.
In all the following questions, enter percentages in decimal form, i. e. enter 2.1234% as 0.021234. Assume semi-annual compounding.
Compute the one-year forward rate in six months, i. e. compute f(0,0.5,1.5)
Compute the one-year forward rate in one year, i. e. compute f(0,1.0,2.0)
Compute the one-year forward rate in two years, i. e. compute f(0,2.0,3.0)
Compute the 1.5-year forward rate in six months, i. e. compute f(0,0.5,2.0)
Compute the 1.5-year forward rate in one-year, i. e. compute f(0,1.0,2.5)
Compute the 1.5-year forward rate in 1.5-years, i. e. compute f(0,1.5,3.0)
Compute the two-year forward rate in six-months, i. e. compute f(0,0.5,2.5)
Compute the two-year forward rate in one-year, i. e. compute f(0,1.0,3.0)
Compute the 2.5-year forward rate in six-months, i. e. compute f(0,0.5,3.0)
Answers: 2
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You observe the following term structure of interest rates (zero-coupon yields, also called "spot ra...
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