If the Interest Rate on a One-Year Bond Today Is

question 3

Multiple Choice

If the interest rate on a one-year bond today is 7.5 percent and the expected interest rate on a one-year bond one year from now is ​5.6 percent, then the interest rate on a two­year bond will be

• A)​7 percent
• B)​12.5 percent
• C)​8.5 percent
• D)​6.55 percent

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