Estimating Spot Rates

\s discussed in the text, spot rates are extremely important in bond valuation and invest-nent decisions, and it is necessary to estimate them. Three techniques have been discussed in the literature. We discuss two of them in this appendix. These two differ in that one of them estimates discrete rates and the other continuous rates.

Consider the following equation relating the price of a bond to the cash flows accruing to the bondholder:

where

p

is the

c

is the

So,

is the

Your Retirement Planning Guide

Your Retirement Planning Guide

Don't Blame Us If You End Up Enjoying Your Retired Life Like None Of Your Other Retired Friends. Already Freaked-Out About Your Retirement? Not Having Any Idea As To How You Should Be Planning For It? Started To Doubt If Your Later Years Would Really Be As Golden As They Promised? Fret Not Right Guidance Is Just Around The Corner.

Get My Free Ebook


Post a comment