Multiple Choice
Consider the following hypothetical situation.The interest rate on a two-year bond today is 7.5 percent and the interest rates on two one-year bonds are 3 percent and 4 percent respectively.The term premium earned by the investors is
A) 5 percent.
B) 4 percent.
C) 4.25 percent.
D) 6 percent.
Correct Answer:
Verified
Correct Answer:
Verified
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