What Forward Rate Is Embedded in a Two Year Zero

question 26

Multiple Choice

What forward rate is embedded in a two year zero coupon bonds with a yield to maturity
Of 6% and a three year zero coupon bond and a yield to maturity of 6.5%? Assume both bonds are currently priced at par.

• A) 5.50%
• B) 6.00%
• C) 6.50%
• D) 7.50%

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Definitions:

Quiet Possession

The legal guarantee that a buyer or lessee can enjoy the use of property without interference or claims from a third party.

Monthly Tenancy

A rental agreement where the lease is renewed on a monthly basis, allowing for more flexibility in tenancy duration.

Action

In legal terms, it refers to a lawsuit taken to court to enforce a particular right.

Distrain

The act of seizing someone's property in order to obtain payment of money owed, especially rent.