The zero curve is upward sloping.Define X as the 1-year par yield,Y as the 1-year zero rate and Z as the forward rate for the period between 1 and 1.5 year.Which of the following is true?
A) X is less than Y which is less than Z
B) Y is less than X which is less than Z
C) X is less than Z which is less than Y
D) Z is less than Y which is less than X

Question

Quizplus · Accepted Answer

When the zero curve is upward sloping,the one-year zero rate is higher than the one-year par yield and the forward rate corresponding to the period between 1.0 and 1.5 years is higher than the one-year zero rate.The correct answer is therefore A.

The Zero Curve Is Upward Sloping