Suppose That the One-Year and Two-Year Zero-Coupon Rates Are 6

question 13

Multiple Choice

Suppose that the one-year and two-year zero-coupon rates are 6% and 7%,respectively (assume continuous compounding) .After one year,let the one-year zero-coupon rate move down to 4% or up to 9%.What must be the probability of the up move for the rates to be arbitrage-free?

• A)0.20
• B)0.25
• C)0.50
• D)0.60

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Definitions:

Deviance

Behaviors or actions that violate social norms, including formally-enacted rules as well as informal violations of social norms (e.g., rejecting folkways and mores).

Phenomenologists

Scholars or philosophers who study the structure of experiences to understand the essence of phenomena as consciously experienced from the first-person perspective.

Ethnography

A qualitative research method focusing on the systematic study of people and cultures from the insider perspective.

Labeling

The process of classifying or naming individuals or groups based on their actions, attributes, or perceived characteristics, often leading to stereotyping or discrimination.