You Note the Following Yield Curve in the Wall Street

question 64

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? $$\begin{array} { l l } \text { Maturity } & \text { Yield } \\\text { One day } & 2.00 \% \\\text { One year } & 6.00 \\\text { Two years } & 7.50 \\\text { Three years } & 9.00\end{array}$$

• A)7.6 percent
• B)8.6 percent
• C)9.0 percent
• D)10.2 percent

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Definitions:

Current-Year Prices

Prices of goods and services measured during the same year of analysis, not adjusted for inflation.

Base-Year Quantities

Quantities of goods and services in a specific base year used for comparison or calculation purposes in economic analysis.

Laspeyres Index

A measure of the change in the cost of purchasing a specified set of goods and services over time, using the quantities bought in a base period as weights.

Bankruptcy Law

Legal statutes and regulations that govern the process by which individuals or enterprises can declare their inability to pay their debts and seek relief.