Chapter 10. Interest Rates Study Notes contains 21 pages covering the following learning objectives:

* Calculate and interpret the impact of different compounding frequencies on a bond’s value.

* Define spot rate and compute spot rates given discount factors.

* Interpret the forward rate, and compute forward rates given spot rates.

* Define par rate and describe the equation for the par rate of a bond.

* Interpret the relationship between spot, forward, and par rates.

* Assess the impact of maturity on the price of a bond and the returns generated by bonds.

* Define the “flattening” and “steepening” of rate curves and describe a trade to reflect expectations that a curve will flatten or steepen.

* Describe a swap transaction and explain how a swap market defines par rates.

* Describe overnight indexed swap (OIS) and distinguish OIS rates from LIBOR swap rates.

After reviewing the notes, you will be able to apply what you learned with practice questions.

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