CFA Practice Question

CFA Practice Question

Today the rate for investing for 1 year is 5.1%. The forward rates for investing for 1 year are:

1 year from now: 5.2%
2 years from now: 5.29%

The spot rate for two years is:
A. 0.05050
B. 0.05150
C. 0.04950
Explanation: Spot rate for 2 years = ((1+forward rate 1 year)*(1+forward rate 2 year))0.5 - 1

User Contributed Comments 1

User Comment
moneyguy ((1.051)(1.052))^.5 - 1 = .0515
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