Suppose That All Investors Expect That Interest Rates for the 4

question 52

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: $$\begin{array} { l | l | } \hline \text { Year } & \text { Forward Interest Rate } \\\hline 0 & \text { (today) } 5 \% \\\hline 1 & 7 \% \\\hline 2 & 9 \% \\\hline 3 & 10 \% \\\hline\end{array}$$
-What is the yield to maturity of a 3-year zero coupon bond?

• A)7.00%
• B)9.00%
• C)6.99%
• D)7.49%
• E)none of the above

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Definitions:

Normally Distributed

A data distribution pattern in which most measurements are concentrated around the mean, creating a symmetrical bell-shaped curve.

Correlation Coefficient

A statistical measure that indicates the extent to which two variables fluctuate together, ranging from -1 to 1, where 1 means a perfect positive correlation.

Statistical Measure

Any of the various calculations used to summarize, describe, or interpret data, including mean, median, mode, variance, and standard deviation.

Two Variables

Refers to the consideration or analysis of two different pieces of data or aspects of the same research or study topic.