Question
What is a forward rate in fixed income?
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Answer
An implied future borrowing or lending rate from current spot rates.
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Question
In a normal upward-sloping spot curve, why is the par rate below the spot rate at the same maturity?
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Answer
Earlier coupons are discounted at lower spot rates, pulling the par rate down.
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Question
Why is the par curve derived from the spot curve rather than observed independently from zero-coupon rates?
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Answer
Par rates depend on discounting coupon cash flows using spot rates.
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Question
What does a par rate represent for a given maturity?
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Answer
The coupon rate that makes a hypothetical bond price at par.
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