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  3. 3. forward rates. the one-year spot rate (r) is 4.

3. Forward Rates. The one-year spot rate (r) is 4.00%, the two-year spot rate (r2)...

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3. Forward Rates. The one-year spot rate (r) is 4.00%, the two-year spot rate (r2) is 4.25%, and the three year-spot rate (13) is 4.50%. Assume that differences in spot rates reflect differences in expected future interest rates. To get full credit you must write out the relevant formula and then solve for the requested forward rate. (a) What is the one-year forward rate between years 1 and 2? (b) What is the one-year forward rate between years 2 and 3? (c) If the one-year forward rate between years 3 and 4 is 4.60%, what must the four-year spot rate (r4) equal

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