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Basic Question 2 of 5
The minimum data required to calculate the implied forward rate for five years beginning two years from now would be ______.
B. the two-year and seven-year spot rates
C. spot rates at six-month intervals for the seven-year period
A. spot rates at six-month intervals for two years and the seven-year spot rate
B. the two-year and seven-year spot rates
C. spot rates at six-month intervals for the seven-year period
User Contributed Comments 3
| User | Comment |
|---|---|
| MadsI | The following must hold:(1+R2)^2 x (1+R5)^5 = (1+R7)^7 - otherwise you could arbitrage. You can calculate R5 if you know R2 and R7 - remember to adjust for semiannual payments. |
| mtcfa | Wouldn't you need to go out one year further. The answer to this question appears to totally conflict with the formula on how to compute a forward rate. |
| mtcfa | Disregard my prvious comment. The text gives a clear explanation. |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
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.