You Find a Two Year STRIPS with and Interest Rate

question 105

Multiple Choice

You find a two year STRIPS with and interest rate of 5.8 percent, and a three-year STRIPS with an interest rate of 6.3 percent. What is the implied one-year interest rate in two years? Assume the rates are effective annual rates.

• A) 7.42%
• B) 5.21%
• C) 7.31%
• D) 7.83%
• E) 6.91%

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Definitions:

Paramount Pictures

One of the major American film studios, founded in 1912, known for producing and distributing a wide array of notable and successful films.

Gulf Western

An American conglomerate involved in a variety of businesses, including entertainment through its ownership of Paramount Pictures before undergoing major restructuring and divestment.

On-Screen Nudity

The depiction of bare human bodies in film or television, which can be a subject of censorship and classification debates.

Garden of Eden

A biblical paradise described in the Book of Genesis, often symbolizing innocence and unspoiled beauty, and believed to be the original home of Adam and Eve.