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 Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter5: Probability: An Introduction To Modeling Uncertainty

Section: Chapter Questions

Problem 29P: The Siler Construction Company is about to bid on a new industrial construction project. To...

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