In: Finance
Using the Rates Below, please calculate the Long-Term Spot rate from the combination below.
1 year spot rate = 3.1%
2 year forward rate = 3.6% **
Please enter rates as whole numbers (ex: 0.0235 as 2.35) **
Using Unbiased Expectation Theory,
(1 + r1,2)2 =(1 + r1,1)(1 + f2,1)
(1 + r1,2)2 = (1 + 0.031)(1 + 0.036)
r1,2 = 3.35%