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what's the meaning of Bond Pricing with spot rate?

幫考網(wǎng)校2020-10-12 10:09:10
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Bond pricing with spot rate refers to the method of determining the fair value of a bond based on the prevailing spot rates of interest for different maturities. Spot rates are the yields on zero-coupon bonds of different maturities, and they represent the market's expectation of future interest rates. By using spot rates to discount the future cash flows of a bond, investors can estimate its present value and compare it to the market price to determine if it is overvalued or undervalued. The spot rate curve can also be used to calculate the yield to maturity of a bond, which is the total return an investor can expect to earn if they hold the bond until maturity.
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