Say the Current One-Month Interest Rate Is 3 $7.23 \%$

question 23

Multiple Choice

Say the current one-month interest rate is 3.75%.Further,the three-month rate is 6.25%.According to the expectation theory,what is the predicted rate for the coming two-month period?

• A) \( 7.23 \% \)
• B) \( 6.74 \% \)
• C) \( 7.47 \% \)
• D) \( 7.48 \% \)

---

Definitions:

Interest Rates

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, or the rate at which interest is paid by bond issuers on the bond’s face value.

Military Bases

Facilities established by the military for housing troops, storing equipment, and training personnel, often strategically located.

Java Jacket

A protective sleeve designed to insulate a person's hand from hot beverages in disposable coffee cups.

Innovator

An individual or organization that introduces new ideas, products, or methods, driving progress and often leading to significant changes in industries or markets.