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Exercise 1. Let Z(t, T) denote the price at time t s T of a ZCB with maturity T. Suppose the annually compounded rate during

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Exercise 1. Let Z(t, T) denote the price at time t s T of a ZCB with maturity T. Suppose the annually compounded rate during (t, T) is a constant ra. Show that Z(t, T) = (1+r4)-(T-1). (1) using no-arbitrage argument

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