The Yield on a One-Year Bond Is 6% Today and Is

question 66

Multiple Choice

The yield on a one-year bond is 6% today and is expected to be 8.5% next year.Based on the expectations theory,what is the yield of a two year bond today?

• A) 15.01%
• B) 12.68%
• C) 5.67%
• D) 7.24%

Understand the concept of exchange rates and calculate the comparative value of currencies.

Interpret and calculate percentage changes in trade balances and understand their implications.

Determine the impact of sales promotions on pricing and calculate original prices from sale prices.

Calculate and compare management and other fees as percentages of investments in financial contexts.

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Definitions:

Normal Distribution

A statistical distribution that is uniform around the average, indicating that observations close to the mean are more common than observations distant from the mean.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; used in finance to quantify the risk of an investment.

Capital Gain

The profit earned from the sale of an asset, such as stocks or real estate, which exceeds its purchase price.

Dividend Yield

A metric showing the yearly dividend payment of a company as a proportion of its stock price.