The Following Information Relates to Questions 16-29

question 5

Multiple Choice

The following information relates to Questions 16-29

-The one-year spot rate r(1) = 4%, the forward rate for a one-year loan beginning in one year is 6%, and the forward rate for a one-year loan beginning in two years is 8%. Which Of the following rates is closest to the three-year spot rate?

• A) 4.0%
• B) 6.0%
• C) 8.0%

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Definitions:

Economic Efficiency

Economic efficiency occurs when a system maximizes its resources to produce optimal quantities of goods and services, thus minimizing waste and inefficiencies.

Monopoly Power

The ability of a firm or entity to control or dominate an industry or sector, enabling it to set prices above competitors without losing significant market share.

Brand Loyalty

The tendency of consumers to continuously purchase one brand's products over competing brands due to perceived satisfaction and quality.