If the Interest Rates on One- to Five-Year Bonds Are

question 53

Multiple Choice

If the interest rates on one- to five-year bonds are currently 4%, 5%, 6%, 7% and 8%. The maturity premiums for one- to five-year bonds are 0%, 0.25%, 0.35%, 0.4% and 0.5%, respectively. Predict what the implied one-year interest rate will be two years from now?

• A) 7.21%
• B) 7.50%
• C) 6.54%
• D) 8.38%
• E) 7.87%

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