Promise I will like Assume the current yield curve for default-free zero-coupon bonds is as...
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Promise I will like
Assume the current yield curve for default-free zero-coupon bonds is as follows:
| Maturity (Years) | YTM (%) |
| 1 | 5 |
| 2 | 6 |
| 3 | 7 |
| 4 | 8 |
Starting from year 4, the yield curve is flat at 8% for all the longer (longer than 4 years) maturities.
What is the implied one-year forward rate starting at the beginning of year 1, year 2, and year 3, respectively? (6 Marks)
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