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Basic Question 4 of 5
Using the rates of z1= 3.00%, f1,1= 3.60%, f2,1= 3.92%, f3,1= 5.15%, compute the period three (1.5 years) spot rate. fn,m refers to forward rate starting from period n for m period(s).
B. 3.506%
C. 5.352%
A. 1.784%
B. 3.506%
C. 5.352%
User Contributed Comments 7
| User | Comment |
|---|---|
| ramdabom | Do you need to use the semi-annual rates? |
| charlie | yes you need to use semi-annual rates. |
| mountaingoat | i need help in how the equation for z3 was derived from: (1+ jFk)^(k-j) formula from the study notes. |
| surjoy | Look @ CFA volume 5 book. page no. 458 |
| Richie188 | curriculum page 426 |
| bammi1 | This could more easily be solved as [(1+.03)(1+.036)(1+.0392)]^(1/3) this way you don't have to remember to multiply your answer by 2. |
| CFALucille | bammi1- thanks, you're right, there's no weird compounding or anything to worry about; it's exactly the same |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
define par and forward rates, and calculate par rates, forward rates from spot rates, spot rates from forward rates, and the price of a bond using forward rates
CFA® 2025 Level I Curriculum, Volume 4, Module 9.