If the One-Year Spot Interest Rate Is 8 Percent and the Two-Year

question 46

Multiple Choice

If the one-year spot interest rate is 8 percent and the two-year spot interest rate is 9 percent, calculate the one-year forward interest rate one year from today.

• A)10 percent
• B)10.5 percent
• C)11 percent
• D)11.5 percent

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Definitions:

Expectancy Theory

A motivational theory that suggests an individual's behavior is determined by their expectations of how much their effort will lead to desired performance and rewards.

Expectancy

The belief about the likelihood that a particular effort will lead to a particular level of achievement or outcome.

Performance Accomplishment

Achievements or outcomes that demonstrate an individual's or group's effective execution of tasks, often measured against pre-defined standards or goals.

Expectancy Theory

A motivational theory suggesting that individuals are motivated to act based on the expected outcomes of their actions.