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Calculate forwand rates for all 5 years

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Final answer:

To calculate forward rates for all 5 years, we need to have the current spot rates and the rate of inflation for each year. Using the formula Forward Rate = Spot Rate × (1 + Inflation Rate)^t, we can calculate the forward rates as follows: Year 1: 3.06%, Year 2: 4.2%, Year 3: 5.95%, Year 4: 7.03%, Year 5: 8.91%.

Step-by-step explanation:

To calculate forward rates for all 5 years, we need to have information about the current spot rates and the rate of inflation for each year. We can use the formula: Forward Rate = Spot Rate × (1 + Inflation Rate)^t, where t is the number of years in the future. Let's assume the spot rates for the 5 years are 3%, 4%, 5%, 6%, and 7%, and the inflation rates are 2%, 2.5%, 3%, 3.5%, and 4% respectively. Plugging these values into the formula, we can calculate the forward rates as follows:

Year 1: 3% × (1 + 0.02)^1 = 3.06%

Year 2: 4% × (1 + 0.025)^2 = 4.2%

Year 3: 5% × (1 + 0.03)^3 = 5.95%

Year 4: 6% × (1 + 0.035)^4 = 7.03%

Year 5: 7% × (1 + 0.04)^5 = 8.91%

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