The Following Represents Two Yield Curves

question 10

Multiple Choice

The following represents two yield curves. What interest rate is expected on a one-year B-rated corporate bond in one year? (Hint: Use the implied forward rate.)

• A)10.0 percent.
• B)9.09 percent.
• C)14.15 percent.
• D)12.0 percent.
• E)17.0 percent.

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Definitions:

Pounds

A unit of weight commonly used in the United States and Britain, equivalent to 0.453592 kilograms.

Indifference Curves

Graphical representations in microeconomics to show combinations of two goods that provide the consumer with the same level of satisfaction.

Price Rises

An increase in the cost of goods or services, affecting the buying behavior of consumers and potentially leading to changes in market dynamics.

Indifference Curves

Graphical representations in microeconomic theory that illustrate different combinations of two goods between which a consumer is indifferent in preference.