5.10 The bootstrapping the zero Curve An amount 2.5 can be earned on 97.5 during 3 months The 3-month rate is 4 times 2.5/97.5 or 10.256% with quarterly compounding This is 10.127% with continuous compounding Similarly the 6 month and 1 year rates are 10.469% and 10.536%with continuous compounding Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 5.10 The Bootstrapping the Zero Curve • An amount 2.5 can be earned on 97.5 during 3 months. • The 3-month rate is 4 times 2.5/97.5 or 10.256% with quarterly compounding • This is 10.127% with continuous compounding • Similarly the 6 month and 1 year rates are 10.469% and 10.536% with continuous compounding