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Hi!
When calculating the forwards I did 1.5398+(1.5178-1.5398)/9*1 but didn’t give me the right answer. The examiner did 1.5398-(1.5398-1.5178)/9*1.But in lammer plc June 2006, the examiner did in my way. Please explain me the correct method.The examiner uses the same approach in both Lammer and Polytot.
Think about it! Since the 3 and 6 month forward rates are lower than spot, then the 4 month forward rate must be lower also!!!
If they were both higher than spot, then so too would be the 4 month rate.
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