F12 Spot Rates Flashcards
1
Q
what is a spot rate?
A
s_t, is the yield rate for a zero-coupon bond with maturity in t-years.
Unless stated otherwise, assume that s_t is an annual effective rate of interest.
2
Q
what is the PV eqn using spot rates?
A
PV = CF_t * (1+s_t)^t
You can split the cash flow as needed
