1.Given spot rates for one-, two-, and three-year zero coupon bonds, how many forward rates can be...

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Question:

1.Given spot rates for one-, two-, and three-year zero coupon bonds, how many forward rates can be calculated?

2.Give two interpretations for the following forward rate: The two-year forward rate one year from now is 2%.

3.describe the relationship between forward rates and spot rates if the yield curve is flat.

4.A. define the yield to maturity for a coupon bond.

b.Is it possible for a coupon bond to earn less than the yield to maturity if held to maturity?

5.If a bond trader believes that current forward rates overstate future spot rates, how might he or she profit from that conclusion?

6.Explain the strategy of riding the yield curve.

7.What are the advantages of using the swap curve as a benchmark of interest rates relative to a government bond yield curve?

8.describe how the Z-spread can be used to price a bond.

9.What is the TEd spread and what type of risk does it measure?

10.According to the local expectations theory, what would be the difference in the onemonth total return if an investor purchased a five-year zero-coupon bond versus a twoyear zero-coupon bond?

11.Compare the segmented market and the preferred habitat term structure theories.

12.A. l ist the three factors that have empirically been observed to affect Treasury security returns and explain how each of these factors affects returns on Treasury securities.

b.What has been observed to be the most important factor in affecting Treasury returns? C. Which measures of yield curve risk can measure shaping risk?