How to Solve Term Structure — Term structure — spot rates, forward rates, and spot-curve pricing Questions on Exam FM
Sample Practice Problem
ID: #5A9HI
A municipal treasury observes that unit zero-coupon notes cost \(950\) for one year and \(850\) for two years. Calculate the one-year forward rate from year 1 to year 2.
📖 Worked Solution & Strategy
\(1+f_{[1,2]}=950/850\), so \(f_{[1,2]}=0.11764706\). Thus the requested value is \(0.11764706\). Therefore the correct option is \(0.11764706\).