8. Rewrite the formula DDuration in section 20.5.1, so that if the timeToFirstPayment is not inserted, then automatically defaults to 1. [3]In Chapter

8. Rewrite the formula DDuration in section 20.5.1, so that if the timeToFirstPayment α is not inserted, then α

automatically defaults to 1.

[3]In Chapter 22 we discuss polynomial approximations to the term structure. For a further reference on general term structure models, see Hull (2000, Chapters 21–22).

[4]A paper by Gultekin and Rogalski (1984) seems to confirm that it is.

[5]The data are from McCullogh(1990).

[6]The interest rates are pure discount rates, calculated so that the value of a bond with price P and with N payments, C1, C2,..., CN is P = Ct/(1 + rt) [t] . The column market "0mo" gives the instantaneous interest rate—the shortestterm interest rate in the market. You can think of this as the rate paid by a money-market fund on a one-day deposit.