Assume That Today, the Annualized Two-Year Interest Rate Is 12

question 31

Multiple Choice

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. What is the one-year forward rate two years from now?

• A)12.67 percent
• B)113 percent
• C)195 percent
• D)15.67 percent
• E)None of these are correct.

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