Today's Forward Rate $f \left( t _ { 1 } , t _ { 2 } \right)$

question 20

Multiple Choice

Today's forward rate $f \left( t _ { 1 } , t _ { 2 } \right)$ for a period $\left( t _ { 1 } , t _ { 2 } \right)$ in the future ( $t _ { 1 } < t _ { 2 }$ ) is

• A)Unknown until \(t _ { 1 }\)
• )
• B)Settled when we get to \(t _ { 2 }\)
• )
• C)Depends on the ytm of coupon bonds of maturities \(t _ { 1 }\)
• And
• \(t _ { 2 }\)
• )
• D)Depends on the ytm of zero-coupon bonds of maturities \(t _ { 1 }\)
• And
• \(t _ { 2 }\)
• )

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Definitions:

Constant Slope

A line on a graph that has the same steepness throughout, indicating a uniform rate of change.

Price Elasticity

Price elasticity measures how the quantity demanded or supplied of a good changes in response to a change in its price.

Linear Demand

A type of demand relationship where changes in price lead to direct, proportional changes in quantity demanded.

Price Elastic

An assessment of the influence that price changes have on the consumer's purchasing volume of a good.