Forwards on zero coupon bonds Suppose t ≤ T1 ≤ T2 ≤ T3, where t is current time, and ? > 0. Recall that Z(T1, T2) is the price at time T1 of a ZCB with maturity T2, and F (T1, T2, T3) is the forward price at time T1 for a forward contract with maturity T2 on a ZCB with maturity T3.
(a) For each of the pairs of A and B in Table, choose the most appropriate relationship out of ≥, ≤, = and ?, where ? means the answer is indeterminate. Give brief reasoning
(b) What can you say about interest rates between T1 and T2 if
(i) Z (t, T1) = Z (t, T2)?
(ii) Z (t, T1) > 0 and Z (t, T2) = 0?