HI everyone,

Quick question on how to read the yield curves.

In the CFA Material there are for instance spot and forward curves displayed “as of July 2013”. X-axis are the dates beginning mid 2013. My understanding is that the curves show annualized yield. If I would take the y-value of the spot rate curve of beginning 2020, which is depicted as 1.5, this means that the annualized spot rate for an RF investment with horizont of 6,5 years is 1.5%.

Additionally there are different forward curves depicted (all above the spot rate, since it is upwards sloping). Let’s take the July 2017 forward curve which begins in July 2017. Am I correct to assume that it’s y-value for beginning of 2018 is the ann. forward rate for an investment made in July 2017 with an investment horizont of half a year (e.g. f(4, 0.5))?

Thanks for confirming / correcting