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

question 11

Multiple Choice

A one-year STRIPS sells at an interest rate of 3.20% and a two-year STRIPS sells at an interest rate of 3.90%. What is the implied one-year forward rate? Assume the rates are effective annual rates.

• A)4.20%
• B)4.30%
• C)4.40%
• D)4.50%
• E)4.60%

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Definitions:

Scheduled Receipts

Planned incoming deliveries of materials or goods, documented in advance, and vital for inventory and production planning.

Lead Time

The time interval from the initiation of a process until its completion, often used in the context of manufacturing or supply chain management.

Gross Requirement

The total demand for an item, including both independent demand from customers and dependent demand from the production of other items.

Bill Of Material

A comprehensive list of raw materials, components, and assemblies required to construct, manufacture, or repair a product or service.