Bootstrapping a Yield Curve - Quant Trader Interview Question
Difficulty: Hard
Category: Algorithms & Data Structures
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Topics: yield-curve, bootstrapping, fixed-income, zero-rate
Problem Description
You are given the following par rates for annual-pay government bonds:
1-year par rate: 4%
2-year par rate: 5%
3-year par rate: 6%
Describe the process of bootstrapping to determine the zero rates for years 1, 2, and 3. Assume annual compounding.
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