Question

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?

Answer 1

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 value to 4.