4.7. APPENDIX: THE FORWARD FORWARD AND THE FORWARD RATE AGREEMENT 167
everytotaltime to maturityn. So in the situation depicted in Table 4.3 a coupon
paid at time 1 would be discounted at 3% if it is part of a one-period bond, 3.25%
if it is part of a two-period bond, 3.42% if it is part of a three-period bond, and so
on. It is much more logical to work with a discount rate for every payment horizon,
regardless of what bond pays out the money, rather than a discount rate for every
bond, regardless of the date of the payment.