please show all work The 2-year spot interest rate is 6.34% and the 5-year spot interest...

Question

Question

please show all work

business finance

Answer 1

Answer #1

Forward rate for n years m years from now=((1+n+m year rate)^(n+m)/(1+m year rate)^m)^(1/n)-1

1.
Option B
=(1.0615^5/1.0634^2)^(1/3)-1=6.02%

2.
Option C
=(1.0485*1.052*1.0456)^(1/3)-1=4.87%

3.
Option A
=(1.0456^7/1.0513^3)^(1/4)-1=4.13%

Answer 2

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