Suppose That All Investors Expect That Interest Rates for the 4

question 10

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: If you have just purchased a 4-year zero-coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same (Par value of the bond = $1,000)

• A)5%
• B)7%
• C)9%
• D)10%
• E)None of the options

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