A One-Year STRIPS Sells at an Interest Rate of 3

question 12

Multiple Choice

A one-year STRIPS sells at an interest rate of 3.54 percent and a two-year STRIPS sells at an interest rate of 3.49 percent.What is the implied one year forward rate? Assume the rates are effective annual rates.

• A)3.44 percent
• B)3.50 percent
• C)3.54 percent
• D)3.57 percent
• E)3.60 percent

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