Given the Yield on a 3 Year Zero-Coupon Bond Is

question 31

Multiple Choice

Given the yield on a 3 year zero-coupon bond is 7.2% and forward rates of 6.1% in year 1 and 6.9% in year 2,what must be the forward rate in year 3?

• A)8.4%
• B)8.6%
• C)8.1%
• D)8.9%
• E)none of the above.

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Definitions:

Functionalism

A perspective in social sciences and anthropology that explains society and its institutions as collective means to fulfill individual and social needs.

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An American philosopher and psychologist, often referred to as the father of American psychology, known for his work in pragmatism and functionalism.

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