Using the Pure Expectations Approach to the Determination of Interest

question 53

Multiple Choice

Using the pure expectations approach to the determination of interest rates,calculate the expected (E) rate of interest of a two-year investment that will be available in 12 months' time (₁i₃) ,given the following data:
Current rate of return on a one-year-to-maturity (₀i₁) instrument:7.75% per annum
Current rate of return on a two-year maturity (₀i₂) instrument:8.25% per annum
Current rate of return on a three-year maturity (₀i₃) instrument:8.65% per annum

• A) 8.35% per annum
• B) 9.10% per annum
• C) 9.56% per annum
• D) 19.03% per annum

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Definitions:

Engagement Strategy

A plan aimed at increasing involvement and interaction between an organization and its stakeholders or customers.

Multinational Organizations

Companies or businesses that operate in multiple countries, managing production or delivering services in more than one country.

Global Stakeholders

are individuals, groups, or organizations worldwide that have an interest in or are affected by the actions of a business or project.

Relational Approach

A method focusing on building long-term relationships and engagement with customers or stakeholders rather than transactional interactions.