Question in regards to realized return in Spot vs. Forward Curve…
When a Portfolio Manager “project’s a spot curve above or below the forward rate curve,” how do you approach questions like that as the sentence continues… for example, say the end of the question is “and the spot curve truly ends up being above (or below) the forward rate curve, what is the realized return relative to the risk-free interest rate?”
I guess my question here is, there is a lot of variability in how this question is asked and I see it constantly and still don’t understand the logic of how I’m supposed to go about answering it?
Normally, I just keep smashing questions til something makes sense, but having trouble understanding the learning concept behind this.