Three methods for pricing bonds are presented: using a constant yield to maturity, using the yield curve with discount factors, and using implied forward rates from the yield curve with backward induction. By moving beyond the first method, more dynamic duration and convexity analyses emerge. Further, logical connections and extensions are made regarding pricing bonds with embedded options, the calculation of a swap rate, and the “bond bootstrapping” process for building a yield curve.
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Alexander et al. (2026) studied this question.
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