The Annualized Yield on a Three-Year Security Is 13 Percent;

question 74

Multiple Choice

The annualized yield on a three-year security is 13 percent; the annualized two-year interest rate is 12 percent, while the one-year interest rate is 9 percent. The forward rate one year ahead is ____ percent.

• A)2.8
• B)115
• C)103
• D)15.1

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Definitions:

Outstanding Stock

The total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Consolidation

The process of combining financial statements of parent and subsidiary companies into one comprehensive financial statement.

Partial Equity Method

An accounting method used for investments, where the investment is recorded at cost and adjusted for the investor's share of the investee's profits or losses, differing from the full equity method by recognition scope.

Initial Value Method

A financial recording method where the purchase price of an investment is its only recorded value, without adjustments over time.