On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year

Question

On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:

Using the unbiased expectations theory, calculate the one-year forward rates on zero-coupon Treasury bonds for years two, three, and four as of March 11, 20XX. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

On March 11, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:

Explanation / Answer

One year Forward rate One year Forward rate One year Forward rate Year 2 (1+1R2)^2/(1+1R1)-1 ((1+.0256)^2)/((1+0.0238)^1)-1 2.740% Year 3 (1+1R3)^3/(1+1R2)^2-1 ((1+.0278)^3)/((1+0.256)^2)-1 3.221% Year 4 (1+1R4)^4/(1+1R3)^3-1 ((1+0.0291)^4)/((1+0.0278)^3)-1 3.301%

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