If the One-Year Spot Interest Rate Is 6 Percent and the Two-Year

question 58

Multiple Choice

If the one-year spot interest rate is 6 percent and the two-year spot interest rate is 7 percent, calculate the one-year forward interest rate one year from today.

• A)6.5 percent
• B)7 percent
• C)7.5 percent
• D)8 percent

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Definitions:

Merchantability

An implied warranty that a product will meet reasonable expectations of quality and usability for the purpose it was sold for.

Express Warranty

A statement by a seller about the quality, condition, or performance of a product that forms part of the contractual agreement between the buyer and seller.

Super Store

A large retail establishment offering a wide variety of goods, often at lower prices, under one roof.

Injury

Physical harm or damage to a person's body, often resulting from accidents or violence.