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What is the 6-year spot rate

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1. You observe the 4-yr and 5-yr spot interest rates to be 5% & 5¼%, respectively. What is the forward 1-yr rate four years from now? (Use the formula for implied forwards from the beginning of the semester.)

2. Suppose, besides the information you have above, you know that the spot 1-yr rate is 3.3%. And you also know that the next two forward rates are each 5%. Use the formula from the lectures this week to find the forward rate for three years from now (f4 in the notation we've been using). Here, too, do both the approximate and exact ways.

3. If the forward rate five years from now is 6%, what is the 6-year spot rate?

Class is fixed income.... I only need the answer to number 3, number 3 is connected to the first two questions but please just give solution to number 3.

Reference no: EM133057202

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