You are a zero-coupon bond trader at Morgan Stanley. Your quote machine provides the following list of
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Question:
You are a zero-coupon bond trader at Morgan Stanley. Your quote machine provides the following list of prices aligned with their time to maturity. Assume the par value of the bonds is $1,000.
Time to Maturity | Price |
1 | 925.000 |
2 | 792.000 |
3 | 660.000 |
4 | 600.000 |
According to the expectations theory, what is the expected 1-year forward rate in the third year?
a. 12.37%
b. 16.68%
c. 20%
d. 14.86%
e. 8.01%
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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