Use the Figure for the Question(s) Below

question 26

Multiple Choice

Use the figure for the question(s) below.

-The current zero-coupon yield curve for risk-free bonds is shown above. What is the risk-free interest rate on a 3-year maturity?

• A) 3.00%
• B) 3.25%
• C) 3.15%
• D) 6.34%

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Definitions:

Opportunity Cost

Giving up potential improvements from various alternatives by choosing one option.

Scarcity

Scarcity refers to the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources, leading to the necessity of allocation decisions.

Production

The process of combining various inputs to make goods or services for consumption.

Comparative Advantage

The capacity of an individual or country to manufacture a given good or service more efficiently, incurring lower opportunity costs than their counterparts.