CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

Given the spot rates r(1) = 5%, r(2) = 5.5%, and r(3) = 6%, we can determine that:
A. the forward rate f(1,2) is greater than 6%.
B. the forward rate f(1,2) is less than 6%.
C. the forward rate f(1,2) can be either greater or less than, or equal to 6%.
Explanation: The spot rates imply an upward-sloping yield curve. Thus, the forward rate f(1,2) will be greater than r(3) which is 6%.

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