Suppose the Current Six-Year Rate Is 9 Percent and the Current

question 103

Multiple Choice

Suppose the current six-year rate is 9 percent and the current five-year rate is 7 percent. What is the one year forward rate for five years?

• A) 19.57 percent
• B) 18.62 percent
• C) 15.80 percent
• D) 14.65 percent
• E) 12.67 percent

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Definitions:

Rate Of Return

The enhancement or decline in financial value of an investment over a certain course, characterized as a percentage of the investment's initial outlay.

Annual Dividend

The total dividend payment a shareholder receives from a stock or investment in a year, expressed on a per-share basis.

Market Value

The instant price at which transactions for a service or asset can be made.

Required Return

The minimum yearly interest rate that entices both individuals and companies to invest in a specific security or endeavor.