hown in the table below but that with forward guidance it now e Year before guidance 1 2 3 0% 3% 5% bot I w/ forward guidance 0% 0% 0%

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
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20. Suppose that before any forward guidance was given a bank believed the FFR would have the values
shown in the table below but that with forward guidance it now expects lower rates.
Year before guidance
w/ forward guidance
1
0%
0%
2
3%
0%
3
5%
0%
I
How much lower is the average FFR with forward guidance in this example? (Give your answer as a decimal,
so if it changed from 5% to 3% you would enter 0.02)
Transcribed Image Text:20. Suppose that before any forward guidance was given a bank believed the FFR would have the values shown in the table below but that with forward guidance it now expects lower rates. Year before guidance w/ forward guidance 1 0% 0% 2 3% 0% 3 5% 0% I How much lower is the average FFR with forward guidance in this example? (Give your answer as a decimal, so if it changed from 5% to 3% you would enter 0.02)
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