The Following Represents Two Yield Curves -What Interest Rate Is Expected on a One-Year B-Rated Corporate

The following represents two yield curves.
$\begin{array} { | l r r | } \hline \text { Maturity } & \text { Pure Discount Treasury Yields } & \text { B-rated Carparate Band } \\\hline & & \text { Yields (Pure Discaun Bonds) } \\1 \text { year } & 3 \text { percent } & 6\text { percent }\\2 \text { year } & 6 \text { percent }& 10 \text { percent } \\20 \text { year } & 12 \text { percent }& 17 \text { percent } \\\hline\end{array}$
-What interest rate is expected on a one-year B-rated corporate bond in one year? (Hint: Use the implied forward rate. )

A) 10.0 percent.
B) 9.09 percent.
C) 14.15 percent.
D) 12.0 percent.

Correct Answer:

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