Investments, tenth edition

ture of interest rates    ,  the structure of interest 

rates for discounting cash flows of different 

maturities. 

 We demonstrate how the prices of Treasury 

bonds may be derived from prices and yields 

of stripped zero-coupon Treasury securities. 

We also examine the extent to which the term 

structure reveals market-consensus forecasts 

of future interest rates and how the presence 

of interest rate risk may affect those infer-

ences. Finally, we show how traders can use 

the term structure to compute forward rates 

that represent interest rates on “forward,” or 

deferred, loans, and consider the relationship 

between forward rates and future interest 

rates.