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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.
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发表于 2009-3-2 17:09
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