Revision as of 01:21, 20 November 2023 by Admin (Created page with "The current yield rates for zero-coupon bonds are as follows: {| class="table" ! Term (years)!! Annual effective yield rate |- | 1 || 3.5% |- | 2 || 4.0% |- | 3 || 4.0% |- | 4 || 4.5% |} Calculate the implied two-year spot rate at the end of year two. <ul class="mw-excansopts"><li>1.0%</li><li>4.0%</li><li>4.5%</li><li>5.0%</li><li>6.0%</li></ul> {{soacopyright | 2023 }}")
Nov 20'23
Exercise
The current yield rates for zero-coupon bonds are as follows:
| Term (years) | Annual effective yield rate |
|---|---|
| 1 | 3.5% |
| 2 | 4.0% |
| 3 | 4.0% |
| 4 | 4.5% |
Calculate the implied two-year spot rate at the end of year two.
- 1.0%
- 4.0%
- 4.5%
- 5.0%
- 6.0%
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: E
[[math]]
\begin{array}{c}{{1.05^{4}=1.04^{2}(1+f)^{2}}}\\ {{f=0.0601}}\end{array}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.