Assume today is 12/31/2022 and you observe this yield curve. Maturity Spot 1 3.75% 2 3.88% 3 3.95% 4 4.00% 5 4.13% 6 4.50% Replicate the 6-year bond with 2 3-year bonds. In other words, instead of buying the 6-year bond earning 4.5% interest, I want to buy one 3- year bond paying 3.95% interest and another 3-year bond. What would be the rate for that 3-year bond starting 3 years from now? You need to calculate the Forward rate F3x6 Please enter your answer in decimal format and up to 3 decimal places. For example, if your answer is 6.05%, enter .061
Assume today is 12/31/2022 and you observe this yield curve. Maturity Spot 1 3.75% 2 3.88% 3 3.95% 4 4.00% 5 4.13% 6 4.50% Replicate the 6-year bond with 2 3-year bonds. In other words, instead of buying the 6-year bond earning 4.5% interest, I want to buy one 3- year bond paying 3.95% interest and another 3-year bond. What would be the rate for that 3-year bond starting 3 years from now? You need to calculate the Forward rate F3x6 Please enter your answer in decimal format and up to 3 decimal places. For example, if your answer is 6.05%, enter .061
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Ee 122.
![Assume today is 12/31/2022 and you observe this yield curve.
Maturity Spot
1
3.75%
2
3.88%
3
3.95%
4
4.00%
4.13%
4.50%
5
6
Replicate the 6-year bond with 2 3-year bonds. In other words, instead
of buying the 6-year bond earning 4.5% interest, I want to buy one 3-
year bond paying 3.95% interest and another 3-year bond. What
would be the rate for that 3-year bond starting 3 years from now? You
need to calculate the Forward rate F3x6
Please enter your answer in decimal format and up to 3 decimal places.
For example, if your answer is 6.05%, enter .061](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a3e78eb-177a-4641-8051-104081d72a2a%2F07c06861-8a74-4b5e-9d85-bf240657bf37%2Fmqj7dkw_processed.png&w=3840&q=75)
Transcribed Image Text:Assume today is 12/31/2022 and you observe this yield curve.
Maturity Spot
1
3.75%
2
3.88%
3
3.95%
4
4.00%
4.13%
4.50%
5
6
Replicate the 6-year bond with 2 3-year bonds. In other words, instead
of buying the 6-year bond earning 4.5% interest, I want to buy one 3-
year bond paying 3.95% interest and another 3-year bond. What
would be the rate for that 3-year bond starting 3 years from now? You
need to calculate the Forward rate F3x6
Please enter your answer in decimal format and up to 3 decimal places.
For example, if your answer is 6.05%, enter .061
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