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NEW QUESTION: 1
The yield to maturity for a zero coupon bond is equivalent to:
A. forward rates for the maturity of the bond
B. the coupon rate for the bond
C. short rates for the maturity of the bond
D. the spot rate from now till t years, where t is the maturity of the bond
Since the zero coupon bond has no interim interest payments, its only cash flow is the final payment upon maturity. This would be identical to the spot rate from now till t years, where t is the maturity of the bond.
Forward rates are marginal rates that apply to individual years in a multi-period context. Short rates refer to short term interest rates in money market futures contracts. A zero coupon bond has no coupon.