How Can One Invest Today at the 2-Year Forward Rate

question 4

Multiple Choice

How can one invest today at the 2-year forward rate of interest?
I. By buying a 2-year bond and selling a 1-year bond with the same coupon
II. By buying a 1-year bond and selling a 2-year bond with the same coupon
III. By buying a 1-year bond and then after a year reinvesting in a further 1-year bond

• A) I only
• B) II only
• C) III only
• D) II and III only

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Definitions:

Company's Ad

An advertisement or promotional message issued by a business to inform, persuade, or remind consumers about its products or services.

Unauthorized Cards

Payment cards such as credit or debit cards used without the consent or authorization of the cardholder, often resulting in fraudulent transactions.

Counterfeiting

The act of making an imitation of an object, typically money or branded goods, with the intent to deceive.

Redlining

A discriminatory practice by which services (like banking and insurance) are withheld from potential customers in certain neighborhoods based on racial or ethnic composition.