What Is the One Year Interest Rate One Year from Now

question 89

Multiple Choice

What is the one year interest rate one year from now if the current one-year interest rate is 2.55 percent and the two-year interest rate is 3.15 percent? Assume the rates are effective annual rates.

• A) 3.62 percent
• B) 3.67 percent
• C) 3.71 percent
• D) 3.75 percent
• E) 3.88 percent

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Definitions:

Vertical Bars

A graphical representation used in charts and graphs to show quantities with upright rectangles, whose heights are proportional to the values they represent.

Comparative Sizes

A term used to compare the dimensions or magnitudes of different entities or objects, often in a relative context.

Omitted Variable

An unobserved variable that, through its influence on other variables, creates the erroneous appearance of a direct causal relationship among those variables.

External Temperature

The temperature outside of a controlled environment, often impacting various activities and processes.