You Note the Following Yield Curve in the Wall Street

question 10

Multiple Choice

You note the following yield curve in The Wall Street Journal. According to the unbiased expectations hypothesis, what is the one-year forward rate for the period beginning one year from today, ₂f₁? $$\begin{array} { l l } \text { Maturity } & \text { Yield } \\\text { One day } & 3.00 \% \\\text { One year } & 5.00 \\\text { Two years } & 6.25 \\\text { Three years } & 8.00\end{array}$$

• A)1.01 percent
• B)1.19 percent
• C)5.625 percent
• D)7.51 percent

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Definitions:

Political Affiliation

An individual's formal association or identification with a particular political party or stance.

Raising Taxes

The act of increasing the financial charges imposed by the government on individuals' income, corporate profits, or transactions.

Complement of Event

In probability theory, the set of all outcomes in the sample space that are not included in the given event, essentially representing the opposite of the event.

Probability

A quantification of an event's chance of happening, displayed as a figure between 0 and 1, where 0 denotes that the event is impossible and 1 denotes absolute certainty of the event occurring.