CHAPTER 2
Coupon Bond Rate, Zero-Coupon Bond Rate, Forward Rates, and the Shape of the Yield Curve
Chapter 1 showed that risk-free interest rates often vary depending on their maturity. The relationship between risk-free rates and maturity is called the yield curve or the term structure of interest rates. However, for bonds with an identical maturity, there is an additional distinction, discussed in this chapter, between the rates on zero-coupon bonds and those on coupon bonds. A second topic discussed in this chapter is the very useful information on expected future interest rates, or forward rates, provided by the yield curve. This is a key ...
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