Global Capital Market-HMW2

5 years denotes the spot rate of k years means the

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Unformatted text preview: +0.5 years, denotes the spot rate of k years. means the spot rate The result is as follows: years spot rate (%) 6 month forward rate (%) 0.5 4.5 4.00 1 4.25 3.50 1.5 4 5.00 2 4.25 5.50 2.5 4.5 1.52 3 4 0.53 3.5 3.5 1.51 4 3.25 1.01 4.5 3 0.51 Question 3 1. Invest $1 with spot rate (V1) = Invest $1 in 2.5 years and $1 in 0.5 years afterward (V2) ( ) ( )( ) => [ ( ( ) ) 2. Invest $1 with spot rate (V1) = Invest $1 in 1 years and $1 in 5 years afterward (V2) ( ) ( )( ) => ( ) ( ) [( ⁄ ) six month forward rate 7.0000% 6.0000% 5.0000% 4.0000% 3.0000% 2.0000% 1.0000% 0.0000% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 3. 5 2.75 4. ( ) ( )( ) [( ) ( ) ( 5. spot rate time (years) Spot Rate Discount Factor 0.5 1.2500% 0.9938 1 1.3750% 0.9864 1.5 1.5832% 0.9766 2 1.8122% 0.9646 2.5 2.0496% 0.9503 3 2.2911% 0.9339 3.5 2.5350% 0.9156 4 2.7804% 0.8954 4.5 3.0268% 0.8736 5 3.2739% 0.8501 5.5...
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This document was uploaded on 02/15/2014 for the course CAREY BUSI Global Cap at Johns Hopkins.

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