Given below are the yields to maturity on a 5-year bond:
|
Years to maturity
|
Yield to maturity
|
|
1
|
8.0
|
|
2
|
9.0
|
|
3
|
10.0
|
|
4
|
10.5
|
|
5
|
10.8
|
A. What is the implied forward rate of interest for the third year?
B. What (geometric) average annual rate of interest would you receive if you bought a bond at the beginning of the third year and sold it at the beginning of the fifth year?