# Forward

The following question relates to below information. Calculate the 6-month forward rate six 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%

Questin is asking, 1f1 t= 1 m = 1 (1.0225)^2 % (1.02)^1 you get 1.0250 - 1 = .025 x 2 to make it BEY = 5% YTM is a distraction in the question i think.

Yep 1.02 x (1 + f) = 1.0225^2. Therefore: (1 + f) = (1.0225^2) / 1.02 = 1.025 Therefore: 6-month forward rate 6 months from today (BEY basis) = 2.5% x 2 = 5% Cheers

I know they say a lot of cheers in UK and Australia. In Australia the guy friends call each other mate. I find it offensive.

pepp Wrote: ------------------------------------------------------- > I know they say a lot of cheers in UK and > Australia. > > In Australia the guy friends call each other mate. > I find it offensive. Sorry, pepp, here it is just very common… it is another word to say “thank you”.

5% it is BEY = PIR x 2