The "break-even" interest rate for year n that equates the return on an n-period zero-coupon bond to that of an n 1 period zero-coupon bond rolled over into a one-year bond in year n is defined as
A. the forward rate.
B. the short rate.
C. the yield to maturity.
D. the discount rate.
E. None of the options are correct.
A. the forward rate.
The forward rate for year n, fn, is the "break-even" interest rate for year n that equates the return on an n-period zero-coupon bond to that of an n 1 period zero-coupon bond rolled over into a one-year bond in year n.
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