swaps

[theCFAway]

page 170 on reading 32 problem 4, vol 5 on cfai text

where is cfai getting the 1.070024 figure and the 1.08007 figure they use to take the forward rate 1 year and 2 years from now? is this an errata, the forward 1 year rate is 1.06 and 2 year 1.065.

Thanks!

[cpk123]

nope it is not.

1.065^2 / 1.06 = 1.070023585

like wise

1.07^3 / 1.065^2 = 1.08007

[rahuls]

@cpk123

nope it is not.

1.065^2 / 1.06 = 1.070023585 (Its one year forward rate one year from now)

like wise

1.07^3 / 1.065^2 = 1.08007 (one year forward rate two years from now)

[theCFAway]

crap. level 1 is coming back to haunt me.

thanks!