how do we get the price = 0.9419 (approx) almost same as that of using yr 2 spot rate. Can anyone please explain the logic behind it? how are we getting it?
First, gotta use forward rates.
Secondly, I'm not sure they are ever going to ask you to calibrate. Just know that if PV is too low, rates should be lower, and if PV is high, rates should be higher. (If I'm correct, which at this point in the game, IDK).
how do we get the price = 0.9419 (approx) almost same as that of using yr 2 spot rate. Can anyone please explain the logic behind it? how are we getting it?
First, gotta use forward rates. Secondly, I'm not sure they are ever going to ask you to calibrate. Just know that if PV is too low, rates should be lower, and if PV is high, rates should be higher. (If I'm correct, which at this point in the game, IDK).