Question

Suppose today a one year ZCB is priced at 0.97, a two year ZCB is priced...

  1. Suppose today a one year ZCB is priced at 0.97, a two year ZCB is priced at 0.95 and a three year ZCB is priced at 0.92. What is the implied forward rate for a one year loan starting one year from now? What is the implied forward rate for a one year loan starting two years from now?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose that: 1) The interest rate on a one-year bond today is 3%; 2) The interest...
Suppose that: 1) The interest rate on a one-year bond today is 3%; 2) The interest rate on a one-year bond starting one year from now is expected to be 4% per year; 3) The interest rate on a one-year bond starting two years from now is expected to be 5% per year; 4) The risk premium on a two-year bond is 0.5%; and 5) The risk premium on a three-year bond is 1%. Use that information to answer the...
Suppose a stock is priced today at 40 and can go in one year to either...
Suppose a stock is priced today at 40 and can go in one year to either 50 or 30. Assume the one-year risk free rate is 0%. What is the fair value of a one-year call option on the stock with a strike of 42? Assuming the expected rate of return on the stock is 10%, what is the "real world" probability of an up move in the stock? What is the expected return on the call option?
Suppose our underlying is a stock XYZ. Today (t=0), XYZ is priced at $1,013. The storage...
Suppose our underlying is a stock XYZ. Today (t=0), XYZ is priced at $1,013. The storage and insurance cost is $19, paid in advance. The forward contract uses XYZ as the underlying, which will expire in one year from today. The interest rate is 0.042. The forward price at today (t=0) is $1,481.   What is the arbitrage profit that you can make today based on cost-of-carry model, if you are only allowed to either long or short one forward contract...
Suppose you bought today one share of XYZ Company, a fairly priced stock, that just paid...
Suppose you bought today one share of XYZ Company, a fairly priced stock, that just paid $0.27 of dividend per share. Assume the dividend is expected to grow at a constant rate of 5% starting next year and the stock price is expected to be $52.50 at the end of next year. What would be your rate of return on this investment?
Suppose you bought today one share of XYZ Company, a fairly priced stock, that just paid...
Suppose you bought today one share of XYZ Company, a fairly priced stock, that just paid $0.27 of dividend per share. Assume the dividend is expected to grow at a constant rate of 5% starting next year and the stock price is expected to be $52.50 at the end of next year. What would be your rate of return on this investment?
The one-year forward rate 1 year from today is 5%; the one-year forward rate 2 years...
The one-year forward rate 1 year from today is 5%; the one-year forward rate 2 years from today is 5.5%; the one-year forward rate 3 years from today is 6%; the one-year forward rate 4 year from today is 6.5%; and the one-year forward rate 5 years from today is 7%. What should the purchase price of a 2-year zero-coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000?
If the two- year forward rate one year from now is 2%. What does that indicate...
If the two- year forward rate one year from now is 2%. What does that indicate 2% is the annual rate that can be locked in today for holding investment for two years where the investment starts one year from today 2% is the annual rate that can be locked in one year from today for holding investment for two years 2% is the annual rate that can be locked in today for holding investment for one year which starts  two...
. If a bond expiring in one year, with face value of 100, is trading today...
. If a bond expiring in one year, with face value of 100, is trading today for $95, and a similar bond expiring in two years is trading for $90, what should be the forward rate on a forward loan for $100 (to be received in one year, and paid back in two)? If the Forward rate is 5%, what arbitrage strategy has positive profits? Make sure you are state exactly what happens in each period. 6. If the interest...
Let’s say a firm will receive $500 today, $800 one year from now, $1,000 two years...
Let’s say a firm will receive $500 today, $800 one year from now, $1,000 two years from now, $1,200 three years from now, and $1,500 four years. Assuming the interest/discount rate that applies here is 14.8%, what is the present value of these cash inflows?
lets say that you have two securities, a 4.0% one year security, and a 3.0% two...
lets say that you have two securities, a 4.0% one year security, and a 3.0% two year security. 1 - What is the interest rate on a one year security to be issued a one year from today?? 2 - What is the one year forward rate?? 3 - Is there an increasing or a decreasing trend in interest rate levels. 4 - Assume that you are serious about taking a loan and buying an apartment. Would you do now...