Assume That Today, the Annualized Two-Year Interest Rate Is 12

question 5

Multiple Choice

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. Whatisthe one-year forward rate two years from now?

• A) 12.67 percent
• B) 113 percent
• C) 195 percent
• D) 15.67 percent
• E) none of the above

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Definitions:

Common Goal

A shared objective or aim that multiple parties or individuals agree to work towards collaboratively.

Equally

Equally means in a manner that is uniform, impartial, or fair, ensuring that everyone or everything is given the same treatment or consideration.

Solution Options

Available methods or approaches to solve problems or overcome challenges.

Trade-Offs

Decisions that involve a sacrifice of one aspect or value in order to gain another aspect or value, often seen in negotiations or decision-making processes.