The following question relates to below information. Calculate the 6-month forward rate 12 months from now on a bond equivalent yield basis. YTM Spot rate Period 1: 0.5 4% Period 2: 1 4.5% Period 3: 1.5 4.9% Period 4: 2 5.3% Period 5: 2.5 5.7% Period 6: 3 6.5%
strange, same as before 1f2 t = 1 m = 2 [(1.0245)^3 / (1.0225)^2] = 1.0285 so BEY f = 5.70%
Nope.
I do not know how else to do this.
Ops, my mistake. very sorry. Here it is my calculation which is like yours (1 + (0.049 / 2))^3 = (1 + (0.045 / 2))^2 x (1 + f) Therefore: 1 + f = 1.0285. Therefore: 6-month forward rate 12 months from today (BEY basis) = 2.85% x 2 = 5.7%
yup, got the same. We learned a simple formula in school combine T and M in the numerator the denominator spot is simply the T spot so if 1 f 3 you do (1+ spot period 4)^ 4 / (1 + spot 1 )^1 note that 4 - 1 = 1 and 1 is your âTâ in the t F m notation .