Expectations Theory - Forward Rates - Example 1
Channel: Jonathan Kalodimos, PhD
Date: 2017-02-27

Example:  Suppose that a one year bullet bond has an interest rate of 3.5 percent per year and a two year bullet bond has an interest rate of 4 percent per year.  Both bonds are risk free and are quoted on an annual compounding basis. What do we expect the interest rate to be on a one year bullet bond in one year?

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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N