The 1-year spot interest rate is 6% and the 2-year spot interest rate is 9%. Under Pure Expectations Theory, the 1-year forward rate in one year must be: A) 3% B) 16% C) 12% D) 18%
(1.09)^2/1.06 - 1 = 12%
bhill020 Wrote: ------------------------------------------------------- > The 1-year spot interest rate is 6% and the 2-year > spot interest rate is 9%. Under Pure Expectations > Theory, the 1-year forward rate in one year must > be: > > A) 3% > B) 16% > C) 12% > D) 18% C 100(1.06)X = 100(1.09)^2 solve for X = 12
.120849 = C fixed income is going to be the area where I either dodge some big bullets or just crash and burn. i am weak. it might be my weakest knowledge area along with quant. PM scares me too.