A Two-Year STRIPS Sells at an Interest Rate of 3

question 89

Multiple Choice

A two-year STRIPS sells at an interest rate of 3.84% and a three-year STRIPS sells at a rate of 3.97%. What is the implied one-year interest rate two years from now? Assume the rates are effective annual rates.

• A)4.23%
• B)4.36%
• C)4.41%
• D)4.45%
• E)4.50%

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Definitions:

Cognitive Intervention

Techniques and strategies applied to modify cognitive processes, improve mental health, or enhance learning.

Reflexive Behaviour

An automatic, involuntary response to a specific stimulus without conscious thought.

Conditioned Stimulus

A previously neutral stimulus that, after being paired with an unconditioned stimulus, elicits a conditioned response.

Originally Neutral

Describes something that did not have a particular meaning, value, or impact until conditioned or associated with something else.