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Interest Rate Markets Chapter 5 - PowerPoint PPT Presentation


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Types of Rates. Treasury ratesLIBOR ratesRepo rates. Zero Rates. A zero rate (or spot rate), for maturity T, is the rate of interest earned on an investment that provides a payoff only at time TExample. Bond Pricing. To calculate the cash price of a bond we discount each cash flow at the appropriate zero rateIn our example, the theoretical price of a two-year bond providing a 6% coupon semiannually is.

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