Assume That Today, the Annualized Two-Year Interest Rate Is 12

Multiple Choice

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. Whatisthe one-year forward rate two years from now?

A) 12.67 percent
B) 113 percent
C) 195 percent
D) 15.67 percent
E) none of the above