Exam 8006 Topic 5 Question 3 Discussion

Actual exam question for PRMIA's 8006 exam
Question #: 3
Topic #: 5
If the 1-year forward rates for years 1,2,3 and 4 are 2%, 3%, 4% and 5% respectively, what is the zero coupon spot rate for 4 years

Suggested Answer: A Vote an answer

Explanation
The zero coupon spot rate for 4 years can be calculated as = (1.02*1.03*1.04*1.05)^(1/4) - 1 = 3.49%, which is the correct answer. (3.50% is just the mathematical average of the rates for the four years and is not correct, even though close.)

by Ben at Jun 05, 2026, 10:01 AM

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