Complete Problem 16 from the Questions and Problems section

Complete Problem 16 from the Questions and Problems section of Chapter9: According to the pure expectations theory of interest rates, how muchdo you expect to pay for a one-year STRIPS on February 15, 2011?  Whatis the corresponding implied forward rate? How does your answer compareto the current yield on a one-year STRIPS?  What does this tell youabout the relationship between implied forward rates, the shape of thezero coupon yield curve, and market expectations about future spotinterest rates?  Remember to complete all parts of the questions, andreport the results of your analysis.  Respond to at least two of yourclassmates’ posts outside of your own thread.


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