Given the Yield on a 3-Year Zero-Coupon Bond Is 7

question 7

Multiple Choice

Given the yield on a 3-year zero-coupon bond is 7% and forward rates of 6% in year 1 and 6.5% in year 2, what must be the forward rate in year 3?

• A) 7.2%
• B) 8.6%
• C) 8.5%
• D) 6.9%

---

Definitions:

Theory X

A management theory assuming employees are inherently lazy and will avoid work if they can, necessitating control and coercion.

Directive Relationships

Relationships characterized by one party giving instructions or directions to another within an organizational hierarchy.

Command-and-control

A management style characterized by hierarchical authority, strict discipline, and a focus on compliance and order.

Self-directed

Relating to individuals who are able to guide, manage, and assess their own learning and work without constant supervision.