In the Cox-Ingersoll-Ross (CIR 1985) Model, You Are Given That $d r _ { t } = \kappa \left( \theta - r _ { t } \right) d t + \sigma \sqrt { r _ { t } } d W _ { t }$

question 22

Multiple Choice

In the Cox-Ingersoll-Ross (CIR 1985) model, you are given that $d r _ { t } = \kappa \left( \theta - r _ { t } \right) d t + \sigma \sqrt { r _ { t } } d W _ { t }$ where $x = 0.5$ , $\theta = 0.06$ , $\sigma = 0.10$ , and the current short rate of interest is $r _ { 0 } = 0.08$ . What is the expected short rate of interest one year hence?

• A) 6.6%
• B) 7.2%
• C) 7.6%
• D) 8.2%

---

Definitions:

Broca's Area

An area located in the dominant hemisphere's frontal lobe, typically on the left side, of the brain, associated with the generation of speech.

Cerebral Cortex

The outer layer of the brain, responsible for complex cognitive functions such as thought, memory, and decision-making.

Anorexia Nervosa

Eating disorder in which people fail to maintain body weights that are normal for their age and height and have fears of becoming fat, distorted body images, and amenorrhea.

Restricting Type

A subtype of anorexia nervosa where weight loss is achieved by restricting calorie intake, without engaging in binge-eating or purging behaviors.