Determine the forward rate

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Reference no: EM133110385

See following term structure

Years to maturity

Spot rate

Forward rate

1

6.14%

...

2

6.72%

F2

3

7.35%

F3

a) Determine the forward rate from year 1 to year 2 (f2), as well as the forward rate from year 2 to year 3 (f3) 

b) From the end of year 2 to the end of year 3, what will the spot rate be?

c) Given the given term structure, what is the current price of a $1000 20-year bond with 3 years to maturity? Assume that the bond has a 4 percent annual coupon rate (paid annually) assume the bond has just made a coupon payment and has 3 coupon payments left.

Reference no: EM133110385

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