The Yield Curve Is Flat at 6% Per Annum

question 2

Multiple Choice

The yield curve is flat at 6% per annum.What is the value of an FRA where the holder receives interest at the rate of 8% per annum for a six-month period on a principal of $1,000 starting in two years? All rates are compounded semiannually.

• A) $9.12
• B) $9.02
• C) $8.88
• D) $8.63

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Definitions:

Trait

A stable characteristic or quality that defines an individual's personality and influences behavior.

Cognitive Psychology

The study of mental processes such as "attention, language use, memory, perception, problem-solving, creativity, and thinking."

Mental Processes

The internal cognitive operations that underlie thinking, understanding, reasoning, and problem-solving.

Behavioral

Relating to or concerned with the actions or activities of living organisms in response to external or internal stimuli.