Revision as of 10:22, 22 November 2023 by Admin (Created page with "'''Solution: E''' The expected value for the bond to yield 2 years from now is 16.5%. Thus, the 2 year forward must equal (1.165)<sup>2</sup>. Thus the one year forward rate for year two is j, where: <math display = "block"> (1.14)(1+j)=(1.165)^2 \implies j= .191 </math> {{cite web |url=https://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1008&context=statsp |last=Hardiek |first=Aaron |date=June 2010 |website=digitalcommons.calpoly.edu | title = Study Quest...")
Exercise
ABy Admin
Nov 22'23
Answer
Solution: E
The expected value for the bond to yield 2 years from now is 16.5%. Thus, the 2 year forward must equal (1.165)2. Thus the one year forward rate for year two is j, where:
[[math]]
(1.14)(1+j)=(1.165)^2 \implies j= .191
[[/math]]
Hardiek, Aaron (June 2010). "Study Questions for Actuarial Exam 2/FM". digitalcommons.calpoly.edu. Retrieved November 20, 2023.