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Unformatted text preview: $940, $880, $800, and $735, respectively. All issues have face values of $1000. 1) What are the corresponding one-, two-, three-, and four-year spot rates? 2) What will be the one-year spot rate in two years (at time t=2)? 3) Suppose Firm X wants to enter a forward contract with you to borrow some money next year (at time t=1) that it will repay one year thereafter (at time t=2). What interest rate would you quote Firm X for this forward loan? Is this the rate that you would quote to all firms who want a forward loan?...
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- Fall '08
- Finance, Forward contract, Forward price, Spot price, face values