Suppose That All Investors Expect That Interest Rates for the 4

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: If you have just purchased a 4-year zero-coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same? (Par value of the bond = $1,000.)

A) 5%
B) 3%
C) 9%
D) 10%