Kindly help, I’m really stuck on this one:
The six-month spot rate is 4.0% and the 1-year spot rate is 4.5%, both stated on a semiannual
bond basis. The implied six-month rate six months from now, stated on a semiannual bond basis,
is closest to:
A. 4%.
B. 5%.
C. 6%.
There are 2 strategies here:
- Invest for a whole year at 4.5% BEY
- Invest for 6 months at 4.0% BEY and reinvest at the implied 6 month rate.
Both strategies should produce the same ending value. 
Thanks a lot mr. breadmaker
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