One-, two-, and three-year maturity, default-free, zero-coupon bonds have yields to maturity of 7%, 8%, and 9%, respectively. What is the implied 1-year forward rate 1 year from today?

Name: One-, two-, and three-year maturity, default-free, zero-coupon bonds have yields to maturity of 7%, 8%, and 9%, respectively. What is the implied 1-year forward rate 1 year from today?
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Quizplus · Accepted Answer

1.07(1 + f₂) = 1.08² = 1.1664 (1 + f₂) = 1.1664/1.07 = 1.0900935 f₂ = 9.01%

One-, Two-, and Three-Year Maturity, Default-Free, Zero-Coupon Bonds Have Yields