derivatives question. my eyes glazed over.

Which of the following most accurately explains the “break-even-rate” interpretation of forward rates? The forward rate is the rate that will make an investor indifferent between investing: A) now or at a forward time. B) investing at the spot or forward interest rate. C) for the full investment horizon or for part of it. D) for the full investment horizon, or for part of it, and then rolling over the proceeds for the balance of the investment horizon at the forward rate.

D

D

you guys are going to dominate the exam. me on the other hand… it’s d.

D

D

Can someone break this down for me?

that’s no arbitrage principle. For example, equation for 1f1: (1+r1)(1+1f1)=(1+r2)^2

Okay. The wording got me. Level I stuff! Thanks maratikus.