Assume That Today, the Annualized Two-Year Interest Rate Is 12

question 5

Multiple Choice

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. Whatisthe one-year forward rate two years from now?

• A) 12.67 percent
• B) 113 percent
• C) 195 percent
• D) 15.67 percent
• E) none of the above

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