Suppose the Expected One-Month Rates of Return Are 3% P $3.89 \%$

question 8

Multiple Choice

Suppose the expected one-month rates of return are 3% p.a. ,4.5% p.a.and 7% p.a.for the month ending in one,two and three months' time respectively.According to the expectations theory,what is the three-month nominal yield?

• A) \( 3.89 \% \)
• B) \( 3.92 \% \)
• C) \( 4.17 \% \)
• D) \( 4.85 \% \)

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