Given the Yield on a 3-Year Zero-Coupon Bond Is 7

Multiple Choice

Given the yield on a 3-year zero-coupon bond is 7.2% and forward rates of 6.1% in year 1 and 6.9% in year 2, what must be the forward rate in year 3?

A) 8.4%
B) 8.6%
C) 8.1%
D) 8.9%
E) None of the options are correct.