Well this one could have gone better..
I was not able to fill in the bubbles on the answer sheet as time was up and I allowed myself 5 mins. to fill those in, what a disastrous mistake that was of me (..and yes I know I am a complete klutz for choosing this strategy). Chances of me passing this...
Hi once again,
You are correct: the spot rate is expressed in terms of annual rates normally.
The idea is that one can consider a spot rate like a product that is priced in terms of monetary value (i.e. price) per period, analogous to this is that in a gas station the fuel price is quoted in...
Hi Meredius,
Perhaps I could give you a hand.
At the top of page 137 it is stated that for the given example it is assumed that:
2-year or 24-month spot rate = 6% per year (.060/1)
18-month spot rate = 5% per year (.050/1)
Forward rate compounding frequency is 6 months (2 per year).
Thus...
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