Suppose That the Current One-Year Treasury-Bill Rate Is 3

question 3

Multiple Choice

Suppose that the current one-year Treasury-bill rate is 3.15 percent and the expected one-year rate 12 months from now is 4.25 percent. According to the unbiased expectations theory,what should be the current rate for a two-year Treasury security?

• A)3.70 percent
• B)4.15 percent
• C)2.36 percent
• D)4.74 percent
• E)5.50 percent

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Definitions:

Strategic Contingencies

Involves planning for and responding to events that could significantly impact an organization's ability to achieve its objectives.

Defensiveness

A psychological reaction that occurs in response to a perceived threat, characterized by a protective behavior aimed to defend oneself from criticism or harm.

Substitutability

The degree to which one product or service can be replaced with another to satisfy the same need or want.

David McClelland

A psychologist known for his work on motivation theory, which includes the need for achievement, the need for affiliation, and the need for power.