Question #54427

The six month and one-year rates are 3% and 4% per annum with semi-annual compounding. Is 3.90% or 3.95% or 3.99% closest to the one-year par yield expressed with semi-annual compounding?

Expert's answer

If the six month and one-year rates are 3% and 4% per annum with semi-annual compounding, then 3.99% is closest to the one-year par yield expressed with semi-annual compounding, because 3.99 is the closest number to 4.

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