Given the following data, calculate the current five year interest rate: [Hint: There is more data here than you actually need.]
|
i1t |
2.0% |
|
i2t |
2.8% |
|
i1t+1 |
3.5% |
|
i1t+2 |
3.0% |
|
i1t+3 |
5.0% |
|
i3t |
2.8% |
|
i1t+4 |
4.5% |
|
i4t |
3.4% |
|
i1t+5 |
5.5% |
I need help solving this with step by step instructions please!!
Answer
Formula :
int = (i1t + i1t+1 + i1t+2 + --------+ i1t+n-1)/n
where int = n period interest rate, i1t+n-1 = one year interest rate n years from now.
Using above data we have :
i5t = (i1t + i1t+1 + i1t+2 + i1t+3 + i1t+4)/5 and we have to calculate i5t
=> i5t = (2 + 3.5 + 3 + 5 + 3.4)/5 = 3.38 = 3.4(approx)
Hence, 5 years interest rate is 3.38 or 3.4(approx)
Given the following data, calculate the current five year interest rate: [Hint: There is more data...