Fig 1: Question setup
Question: Calculate the 1, 2 and 3 year spot rates (also called „pure discount“ or „zero“ rates) for an issuer with rating AA.
Fig 2: Formula – Valuation of Coupon-Bearing Bonds
Fig 3: Calculation of spot rate
Question: Determin the forward rates in one year for 1 and 2 years time to maturity (based on current spot rates)