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The 3 year spot rate is 9.5% and the 2 year spot rate is 8.9%.

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The 3 year spot rate is 9.5% and the 2 year spot rate is 8.9%. What is the expected 1-year rate in 2 years from now.;Answer: [(1+9.5%)^3/(1+8.9%)^2] - 1 = 10.71%;Can you explain why? I don't understand why they set this equation up this way?;Additional Requirements;Min Pages: 1;Level of Detail: Show all work

 

Paper#29931 | Written in 18-Jul-2015

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