$\begin{array}{cc}\text { Year } & \text { 1-Year Forward Rate } \\1 & 5\% \\2 & 5.5\% \\3 & 6.0\% \\4 & 6.5\% \\5 & 7.0\%\end{array}$

question 1

Multiple Choice

$\begin{array}{cc}\text { Year } & \text { 1-Year Forward Rate } \\1 & 5\% \\2 & 5.5\% \\3 & 6.0\% \\4 & 6.5\% \\5 & 7.0\%\end{array}$
What should the purchase price of a 2-year zero-coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000?

• A) $877.54
• B) $888.33
• C) $883.32
• D) $894.21
• E) $871.80

---

Definitions:

United States

A country located in North America, comprising 50 states, known for its diverse population, large economy, and significant influence in global affairs.

Interactive Marketing

Two-way buyer–seller electronic communication in which the buyer controls the kind and amount of information received from the seller.

Buyer-Seller

The relationship and interaction between the purchaser and provider of goods or services, crucial for transaction negotiations and customer satisfaction.

Computer-Mediated

Communication or transactions facilitated by computer systems, including the internet and other digital platforms.