You have the following information:
. zero-coupon bond with 6 months to maturity, stands at 99
. 2% coupon bond with 1 year to maturity, stands at 101.5
. zero-coupon bond with 1.5 years to maturity, stands at 97
Compute the 6 months forward rate 1 year from today (ie 0.5f1)
a.2.63
b.2.74
c.3.20
help me please
For the 1.5 year zero coupon, you can invest at the 1 year spot rate and reinvest a the 6 month forward rate 1 year from now. You can solve for the 0.5 year spot rate from the first line and then use that to solve for the 1 year spot rate in the second line.
I get 5.1853%.
Are you sure that your numbers are correct? The price on the 1-year bond seems high.