The Three-Year Zero Rate Is 7% and the Four-Year Zero

question 3

Short Answer

The three-year zero rate is 7% and the four-year zero rate is 7.5% both continuously compounded). What is the forward rate for the fourth year with continuous compounding? Answer as a per cent with two decimal places._ _ _ _ _ _

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Definitions:

Event Contingencies

The relationship between actions and outcomes in a given situation.

Tolman

Edward Chace Tolman was a cognitive psychologist who introduced the concept of cognitive maps in learning theory.

Expectations

Beliefs or predictions about future events that can influence an individual's perception and behavior.

Drives

Internal states of tension or arousal that motivate behavior towards fulfilling specific needs or goals.