Multiple Choice
Assume that the current yield on one-year securities is 6 percent, and that the yield on a two-year security is 7 percent. If the liquidity premium on a two-year security is 0.4 percent, then the one-year forward rate is
A) 8.0 percent.
B) 7.6 percent.
C) 3.0 percent.
D) 7.0 percent.
Correct Answer:
Verified
Correct Answer:
Verified
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