Assume the Interest Rate on a Current One-Year Bond Is

question 81

Multiple Choice

Assume the interest rate on a current one-year bond is 3%,and the expected interest rate on the one-year bond one year from now is 6%.If the term premium on a two-year bond is 0.5%,then the interest rate on the two-year bond will be

• A) 4%.
• B) 4.5%.
• C) 5%.
• D) 6.5%.

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Definitions:

Two-Tail Test

is a statistical test that considers extreme values in both tails of the distribution to test for a non-specific alternative hypothesis.

Wilcoxon Rank-Sum Test

A non-parametric statistical test used to compare two independent samples to assess whether their populations differ in terms of their central tendency.

Ordered Array

An ordered array is a collection of elements arranged in a specified manner, often in ascending or descending order, facilitating easier search and analysis of the data.

Pooled Sample Data

Combined data from two or more samples, often used in statistical analyses to gain more precise estimates of population parameters.