Question

$1,000 par value zero-coupon bonds (ignore liquidity premiums)


Bond Years to Maturity Yield to Maturity
A 1 6.00%
B 2 7.50%
C 3 7.99%
D 4 8.49%
E 5 10.70%

The expected 1-year interest rate 1 year from now should be about ________.

A) 6%

B) 7.5 %

C) 9.02%

D) 10.08%

Answer

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