One,two and Three Year Maturity,default-Free,zero-Coupon Bonds Have Yields-To-Maturity of 7%,8

question 36

Multiple Choice

One,two and three year maturity,default-free,zero-coupon bonds have yields-to-maturity of 7%,8% and 9% respectively.What is the implied one-year forward rate,one year from today?

• A) 2.0%
• B) 8.0%
• C) 9.0%
• D) 11.1%

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Definitions:

Least Elastic Supply

A situation in the market where the supply of a product or service is least responsive to changes in price.

Midpoint Method

A technique used in economics to calculate the elasticity of demand or supply by averaging the start and end points of a range.

Drug Interdiction

The policy or practice of preventing the importation, trafficking, and use of illegal drugs by enforcement or military means.

Supply Curve

A visual chart illustrating the connection between a product's price and the amount of the product that sellers are ready to manufacture and offer for sale.