Suppose That All Investors Expect That Interest Rates for the 4

question 48

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{ll}\text { Year } &\text { Forward Interest Rate }\\ 0 & 4\% \text { (today) } \\1 & 5\% \\2 & 6\%\\3&7\%\end{array}$ What is the yield to maturity of a 3-year zero-coupon bond?

• A) 9.00%
• B) 7.00%
• C) 5.00%
• D) 4.00%
• E) None of the options are correct.

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