Reading 63: Understanding Yield Spreads- LOS d～ Q1-2 2009, discuss, following

yangh

 

LOS d: Define a spot rate.

Q1. The Treasury spot rate yield curve is closest to which of the following curves?

A)   Par bond yield curve.

B)   Zero-coupon bond yield curve.

C)   Forward yield curve rate.

 

Q2. James McDonald and Veasna Lu were discussing different ways of valuing a Treasury security. During their discussion Lu made the following statements:

Statement 1: It is inappropriate to discount the cash flows of a Treasury security by a single discount rate because that is implicitly assuming that the yield curve is flat. Therefore, each individual cash flow should be discounted by its corresponding spot rate.

Statement 2: The spot rates used for different time periods that produce a value equal to the market price of a Treasury bond are called forward rates or future expected spot rates.

With regards to the statements made by Lu:

A)   only one is correct.

B)   both are correct.

C)   both are incorrect.

 

yangh

LOS d: Define a spot rate.fficeffice" />

Q1. The Treasury spot rate yield curve is closest to which of the following curves?

A)   Par bond yield curve.

B)   Zero-coupon bond yield curve.

C)   Forward yield curve rate.

Correct answer is B)

The spot rate yield curve shows the appropriate rates for discounting single cash flows occuring at different times in the future. Conceptually, these rates are equivalent to yields on zero-coupon bonds. The par bond yield curve shows the YTMs on coupon bonds by maturity. Forward rates are expected future short-term rates.

 

Q2. James McDonald and Veasna Lu were discussing different ways of valuing a Treasury security. During their discussion Lu made the following statements:

Statement 1: It is inappropriate to discount the cash flows of a Treasury security by a single discount rate because that is implicitly assuming that the yield curve is flat. Therefore, each individual cash flow should be discounted by its corresponding spot rate.

Statement 2: The spot rates used for different time periods that produce a value equal to the market price of a Treasury bond are called forward rates or future expected spot rates.

With regards to the statements made by Lu:

A)   only one is correct.

B)   both are correct.

C)   both are incorrect.

Correct answer is A)

Statement 2 is incorrect because the spot rates used for different time periods that produce a value equal to the market price of a Treasury bond are called arbitrage-free Treasury spot rates. Statement 1 is correct.

erpang8888

a

connie198226

ss

mer_co_ep

You ask me how my day was as if it is same everyday
I say Im okay but you really dont know how I feel
Do you think Ill be okay without you?
Are you okay without me?
The world without you is so hard that I blame myself for still breathing

What should I do? Even now, I live each painful days because of your words
Tell me if this is a bad thing to do
Are you living each day painfully like I am?
You and me

Are we too late? Dow we not have a chance?
I still think about you and you might know this
Finally is it this? Are we going to end like this? Is it okay with you?
I dont think I can do it. The love I find with you, I wont find it anywhere even if I die

What should I do? If it isnt you no one else can hold my heart
Please hold me. And you know that even though the whole world tries to
No one can erase your memories. So please hold me

What should I do? Even now, I live each painful days because of your words
Tell me if this is a bad thing to do
Are you living each day painfully like I am?
You and me

Is it too late? Do we not have a chance?
But me, I still think about you, and you might not know.
 

dullmul

thx

alida_run

d

saint_zhu

spot rate

dagoose

 看看

kgbvvsscia

thanks