par yield spot yield1 4% 4%2 4.20% 4.2043 4.80% 4.8334 5.20%5 5.50%6 6%7 6.70%8 7.10%9 7.70%

10 8.30%

10004.20%

42

Coupon PV Cash Flow PVCF1 42 42 4% 0.961538 40.38462

42 1000 1042 4.204% 0.920936 959.6158

484848

1001.693

1 yrspot yield Forward

1 5%2 5.50% 6.00%3 6.00% 7.01% invest in 2 yrs, at 5.5% and roll over at 7.01% = same as locking it at 6% in 3yrs4 6.20% 6.80%5 6.40% 7.20%6 6.70% 8.21%7 7.15% 9.89%8 7.60% 10.80%9 8.10% 12.18%

10 8.60% 13.21%

invest in 2 yrs, at 5.5% and roll over at 7.01% = same as locking it at 6% in 3yrs

spotforward rates