In: Finance
An 18-month zero coupon rate is priced at USD 99.1. The 18-month spot rate is?
Given that,
An 18-month zero coupon rate is priced at $99.1
FV = $100
t = 1.5 years
Let 18 month spot rate be r
=> r = (FV/PV)^(1/t) - 1 = (100/99.1)^(1/1.5) - 1 = 0.60%
So, 18 month spot rate = 0.60%