Lecture 5 - Fixed income Flashcards
1
Q
What is a Spot Rate?
A
= zero coupon rate: The interest rate that would be earned on a bond that provides no coupons
2
Q
What is a Forward Rate?
A
The interest rate for a future period of time implied by the rates prevailing on the market today
3
Q
What is the Yield to Maturity?
A
The YTM of a bond is the discount rate that sets the present value of the promised bond payments equal to the current market prices
4
Q
What is a Swap Rate?
A
The fixed rate in an interest swap that causes the swap to have a value of zero
