20-year riskless zero-coupon bonds (say, pure discount U.S. Treasury bonds) are currently yielding 9% to maturity and similar five-year bonds are now yielding 10% to maturity.
1. What is the implied forward rate on a 15-year bond which will start at the end of year 5?
2. According to the liquidity premium theory of the term structure, what is expected rate on a 15-year bond at the end of year 5?
3. How could you lock the 15-year borrowing rate starting at the end of year 5?