Question: The current 3-year spot rate is 4% and current 5-year spot rate is 5.5%. According to the pure expectation theory of the term structure of

The current 3-year spot rate is 4% and current 5-year spot rate is 5.5%. According to the pure expectation theory of the term structure of interest rates, what is the forward rate for 1-year securities beginning four years from today?

____

A) 7.79%

B) 8.23%

C) 10.14%

D) 9.58%

The Windsor Honda offers payments of $493.19 per month for 48 months on a 2018 Civic at the complete price of $21,000 with zero down. What is the annual percentage rate (APR) of this loan?

____

A) 12%

B) 11%

C) 9%

D) 6%

Canadian law requires interest on fixed-rate mortgages to be compounded semi-annually. With an effective annual rate of 5.65%, what is the posted annual percentage rate?

____

Undetermined

5.725%

5.572%

5.257%

Hint: R_ear = [1 + R_apr/m]^m -1

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