Lets say I am given a spot Curve and I buy a zero bond with 5 years maturity and sell it after 2 years. How do I calculate my profit?
To calculate the price I buy the bond for I do the following:
P5 = 1/(1+s5)5
How do I calculate the price I sell the bond for after 2 years? I believe simply calculating P3 = 1/(1+s3)3 is wrong? Should the price be based on forward rates? If so, which forward rates.
Thanks for the help!