Question: Exercise . Consider a bond market in which the annually compounded zerocoupon yields of maturities from to years are y = %,

Exercise . Consider a bond market in which the annually compounded zerocoupon yields of maturities from  to  years are yˆ

 = %, yˆ

 = %, yˆ

 = .%, yˆ

 = .%, yˆ

 = .%.

What are the corresponding discount factors BT, T = , , ... , ? What are the

-year forward rates ˆf T,T+

, T = , , ... , ?

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