If 1-Year Interest Rates for the Next Three Years Are

question 79

Multiple Choice

If 1-year interest rates for the next three years are expected to be 4,2,and 3 percent,and the 3-year term premium is 1 percent,than the 3-year bond rate will be

• A) 1 percent.
• B) 2 percent.
• C) 3 percent.
• D) 4 percent.

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Definitions:

Nominal Variable

A nominal variable is a type of categorical variable for which there is no natural ordering among the categories.

Regression Line Formula

An equation that describes the best-fitting straight line through a set of points, indicating the relationship between two variables.

Regression Line

A line of best fit through a scatter plot of data points that shows the relationship between two variables.

Multiple-Regression Formula

An equation that models the relationship between a dependent variable and two or more independent variables, predicting the dependent variable based on the independents.