Question

In: Finance

using this, approximate formula, without the bond prices, how can we calculate future discount rates / forward rates in excel and I am stuck in (DR 11/20) in excel

1Y0.0383
2Y0.051
5Y0.0559
10Y0.0691
20Y0.0746
30Y0.0744

using this, approximate formula, without the bond prices, how can we calculate future discount rates / forward rates in excel and I am stuck in (DR 11/20) in excel

(1+ DR1) (1+ DR2) = (1+YTM2)2

Solutions

Expert Solution

DR11/20 i.e. discount rate from year 11 to year 20 can be calculated as

DR11/20 = ( (1+ 20 year spot rate)^20/(1+ 10 year spot rate)^10)^(1/10)-1

=(1.0746^20/1.0691^10)^(1/10) -1

= 0.0801 or 8.01%

jeff jeffy answered 3 years ago
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