Assignment:
Suppose the following information is available from the Treasury spot curve: Three-year spot rate = 3.410% Four-year spot rate = 3.854% Answer the following questions.
a. What is the implied forward rate on a one-year zero coupon Treasury three years from now quoted on a bond-equivalent basis?
b. Antti Illmanen states, “Whenever the spot rate curve is upward sloping, the forwards imply rising rates. That is, rising rates are needed to offset long-term bonds’ yield advantage. However, it does not mean that the market expects rising rates.” Explain this statement.
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.