The One-Year Discount Factor Today Is 0

question 8

Multiple Choice

The one-year discount factor today is 0.95. You buy a one-year zero-coupon bond today and hold it until maturity. Suppose that at maturity, the one-year discount factor is 0.92. The return you realize, expressed in simple terms, is:

• A) 3.43%
• B) 5.26%
• C) 8.69%
• D) 9.50%

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Definitions:

Speculative Demand

The demand for assets or goods not for their immediate consumption or use, but for the purpose of resale at a higher price in the future.

Transaction Demand

The demand for money as a medium of exchange, influenced by the level of economic activity.

Branch Banking

The operation of a banking service through multiple branches located in different areas, offering a wide range of services to customers across locations.

States

Individual territorial units constituting a federal union, such as those that make up the United States, each with its own government and a degree of autonomy.