The one-year and two-year zero rates are 1 and 2


Forward rates

(a) The one-year and two-year zero rates are 1% and 2% respectively. What is the one-year forward one-year rate (that is, f11)? Assume all rates are annually compounded.

(b) If the two-year forward one-year rate ( f21) is 3%, what is the three-year zero rate?

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Financial Management: The one-year and two-year zero rates are 1 and 2
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