Suppose That a Bond That Will Mature in Two Years

question 70

Multiple Choice

Suppose that a bond that will mature in two years has a face value of $1000 and 20% coupon rate. The one year spot market interest rate is 13% and the expected second period's forward rate is 12%. According to the expectation hypothesis, the two year spot rate is:

• A) 11.50%.
• B) 9.12%.
• C) 12.74%.
• D) 7.00%.

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Definitions:

Residential Segregation

The division of inhabitants into separate neighborhoods or living spaces based on race, ethnicity, economic status, or other group characteristics, often leading to disparities in access to resources and opportunities.

Geographical Isolation

The physical separation of a population of organisms from others of the same species, often leading to speciation due to the prevention of gene flow.

Segregated

The act or state of separating groups of people or things apart from one another based on various factors like race, gender, or religion.

Homeless Population

Individuals who lack stable, permanent, and adequate housing.