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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