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

question 78

Multiple Choice

A two-year STRIPS sells at an interest rate of 3.84 percent and a three-year STRIPS sells at a rate of 3.97 percent.What is the implied one year interest rate two years from now? Assume the rates are effective annual rates.

• A) 4.23 percent
• B) 4.36 percent
• C) 4.41 percent
• D) 4.45 percent
• E) 4.50 percent

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Definitions:

Tertiary Bronchi

These are smaller airways in the lungs that branch off from the secondary bronchi, leading to the bronchioles.

Primary Bronchus

Either of the two main branches of the trachea that lead directly into the lungs, providing a pathway for air flow.

Ciliated

Relating to or having tiny hair-like structures on the surface that move in a wavelike manner to propel substances.

Smooth Muscle

A type of muscle found in the walls of internal organs and blood vessels, functioning involuntarily to regulate bodily processes.