In order to estimate the forward rate for year 6 one needs which of the following?
I.5-year zero
II.6-year zero
III.4-year zero
A)I, III
B)I, II, III
C)I, II
D)II, III

Question

Quizplus · Accepted Answer

In order to estimate the forward rate for year 6, one needs the 5-year zero (to compound the rate for 5 years) and the 6-year zero (to discount the compounded rate for 6 years). The 4-year zero is not necessary for this calculation. Therefore, choices I and II are both required, but choice III is not necessary.

In Order to Estimate the Forward Rate for Year 6