The Yield Curve Is Flat at 6% Per Annum

question 2

Multiple Choice

The yield curve is flat at 6% per annum.What is the value of an FRA where the holder receives interest at the rate of 8% per annum for a six-month period on a principal of $1,000 starting in two years? All rates are compounded semiannually.

• A) $9.12
• B) $9.02
• C) $8.88
• D) $8.63

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Definitions:

Car Dealer

An organization that specializes in selling new or pre-owned automobiles directly to consumers, operating under a dealership agreement with a car manufacturer or its sales division.

Strike

A work stoppage initiated by employees to protest against working conditions, wages, or company policies, aiming to pressure the employer into negotiations.

Demand Period

A specific timeframe during which the demand for a product or service is assessed or observed.

Conditions Accepted

Terms that have been agreed upon by all parties involved in a transaction or agreement.