The two-year spot rate is 4% and the four-year spot rate is 5%. You can buy a tw
ID: 2785307 • Letter: T
Question
The two-year spot rate is 4% and the four-year spot rate is 5%. You can buy a two-year zero coupon bond or a four-year zero coupon bond. Which bond will have the highest return over the first year?
A.
The two-year zero.
B.
The four-year zero.
C.
Both zeros will have the same return over the first year.
You have one-year, three-year, and four-year spot rates. Which of the following forward rates cannot be computed from this information.
A.
Three-year loan beginning in one year
B.
Two-year loan beginning in two years
C.
Two-year loan beginning in one year
D.
One-year loan beginning in three years
A.
The two-year zero.
B.
The four-year zero.
C.
Both zeros will have the same return over the first year.
Explanation / Answer
C.both will have same return over the first year
B. Two year loan beginning in two years
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