3.12 Suppose the spot rates of interest for investment horizons of 1 to 5 years are 4%, and for 6 to 10 years are 5%. (d) Repeat part (c) using equation (3.14). You should get the same answer as in...

3.12  Suppose the spot rates of interest for investment horizons of 1 to 5 years are 4%, and for 6 to 10 years are 5%.

(d) Repeat part (c) using equation (3.14). You should get the same answer as in part (c).

Extracted text: n-1 +1 n-1 II (1+ i) +1 j=t+1 = [(1 + )(1 + { )... (1+ D] + [(1 + i{ )(1 +) -…· (1+ i)] + ...+ (1+) + 1. (3.14)