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

Question 30

Multiple Choice

A one-year STRIPS sells at an interest rate of 3.20 percent and a two-year STRIPS sells at an interest rate of 3.90 percent.What is the implied one year forward rate? Assume the rates are effective annual rates.


A) 4.20 percent
B) 4.30 percent
C) 4.40 percent
D) 4.50 percent
E) 4.60 percent

Correct Answer:

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