Bootstrapping Involves

question 15

Multiple Choice

Bootstrapping involves

• A) Calculating the yield on a bond
• B) Working from short maturity instruments to longer maturity instruments determining zero rates at each step
• C) Working from long maturity instruments to shorter maturity instruments determining zero rates at each step
• D) The calculation of par yields

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Definitions:

Insider Trading

The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.

Security Prices

The market value for tradable financial instruments such as stocks, bonds, and derivatives at any given time.

Efficient-Market Hypothesis

The theory that all available information is already reflected in securities prices, therefore making it impossible to consistently achieve higher returns than the overall market.

Security Prices

The market price at which a financial security is traded.