What is the implied one-year-ahead one-year forward rate

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Reference no: EM131316392

The one-year spot rate is 9 percent per year. The two-year spot rate is 9.5 percent per year.

a. Why would you expect the one-year-ahead one-year forward rate f12 not to be 10 percent?

b. Why would you expect the one-year-ahead one-year forward rate f12 not to be 8 percent?

c. What is the implied one-year-ahead one-year forward rate f12? Show your work.

d. What is the yield to maturity y of a zero-coupon two-year bond? Show your work.

e. What is the yield to maturity y of a two-year bond with a 6 percent coupon? Show your work.

Reference no: EM131316392

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