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I. Determine the par yield rates (yields to maturity on par bonds) and forward rates...

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Accounting

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I. Determine the par yield rates (yields to maturity on par bonds) and forward rates (the ones with ? below) based on the spot curve given below. Make sure that you show your work, not just the answers. Par yield rates Maturity(yr) Spot Rates (%) Par Rates(%) 1 10 ? 2 9 ? 3 8 ? 4 7 ? Forward Rates Maturity (yr) 1 2 3 1 ? ? ? Year Forward 2 ? ? N/A 3 ? N/A N/A (Note) Regarding terminology, for example, the 1 year maturity forward ratc, 1 year forward, is the 1 year forward rate, one year from now (e.g., fm.n,t or f(m,n,t) with m=l and n=2) and the 2 year maturity forward rate, 1 year forward, is the two year forward rate, one year from now (e.g., (m,,t or f(m,n,t) with m=l and n=3)

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