Suppose the Current 6 Year Spot Rate Is 8% and the Current

question 8

Multiple Choice

Suppose the current 6 year spot rate is 8% and the current 5 year spot rate is 7%.What is the one year forward rate in five years?

• A) 12.62%
• B) 11.58%
• C) 13.14%
• D) 14.65%
• E) 15.14%

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Definitions:

Opportunity Costs

The cost of foregone alternatives; the benefits one misses out on by choosing one option over another.

Nations

Politically organized territories with defined borders, a common government, and a shared cultural or historical identity.

Technologies

Encompasses the collection of techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.

Comparative Advantage

The ability of an individual, company, or nation to produce a good or service at a lower opportunity cost than its competitors.