The 3-month ST3 futures has 1 month to expiry. The one month spot rate is 2.00% and the 4 month spot is 2.50%. What is the 3-month forward rate? B. above 2% and below 2.50% A. 2.00% C. 2.50% D. above 2.50%

The 3-month ST3 futures has 1 month to expiry. The one month spot rate is 2.00% and the 4 month spot is 2.50%. What is the 3-month forward rate? B. above 2% and below 2.50% A. 2.00% C. 2.50% D. above 2.50%

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

Can you please help with the question in the picture attached? The answer should be only one and I’m quite confused. Thank you!

The 3-month ST3 futures has 1 month to expiry.
The one month spot rate is 2.00% and the 4 month spot
is 2.50%. What is the 3-month forward rate?
B. above 2% and below 2.50%
A. 2.00%
C. 2.50%
D. above 2.50%

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