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A Two-Year STRIPS Sells at an Interest Rate of 3

Question 78

Multiple Choice

A two-year STRIPS sells at an interest rate of 3.84 percent and a three-year STRIPS sells at a rate of 3.97 percent.What is the implied one year interest rate two years from now? Assume the rates are effective annual rates.


A) 4.23 percent
B) 4.36 percent
C) 4.41 percent
D) 4.45 percent
E) 4.50 percent

Correct Answer:

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