I have a question about calculating spot rates. In the task we're given five spot rates: r1 = 0.5%, r2 = 1.4%, r3 = 1.7%, r4 = 2.1%, r5 = 2.5% The task asks: "According to the current spot rates above, what is the two-year spot rate expected at the end of Year 1? In the solution the task is solved like this: (1.01733 / 1.005 )0.5 – 1 = 0.0231 or 2.31% My question is; What is the general formula in these type of cases?
I have a question about calculating spot rates. In the task we're given five spot rates: r1 = 0.5%, r2 = 1.4%, r3 = 1.7%, r4 = 2.1%, r5 = 2.5% The task asks: "According to the current spot rates above, what is the two-year spot rate expected at the end of Year 1? In the solution the task is solved like this: (1.01733 / 1.005 )0.5 – 1 = 0.0231 or 2.31% My question is; What is the general formula in these type of cases?
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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I have a question about calculating spot rates. In the task we're given five spot rates:
r1 = 0.5%, r2 = 1.4%, r3 = 1.7%, r4 = 2.1%, r5 = 2.5%
The task asks: "According to the current spot rates above, what is the two-year spot rate expected at the end of Year 1?
In the solution the task is solved like this:
(1.01733 / 1.005 )0.5 – 1 = 0.0231 or 2.31%
My question is; What is the general formula in these type of cases?
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