Math Problem Statement
You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the one-year forward rate for the period beginning two years from today, 3f1?
Maturity
Yield
One Day
2.00%
One Year
5.50%
Two Years
6.50%
Three Years
9.00%
6.50%
9.00%
15.34%
14.18%
Solution
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Math Problem Analysis
Mathematical Concepts
Finance
Forward Rates
Unbiased Expectations Theory
Formulas
(1 + y3)^3 = (1 + y2)^2 (1 + 3f1)
Theorems
Unbiased Expectations Theory
Suitable Grade Level
Undergraduate - Finance or Economics
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