Author Question: Suppose the current one-year interest rate is 4. Also assume that financial markets expect the ... (Read 125 times)

SO00 · **on:** Jun 30, 2018

Suppose the current one-year interest rate is 4. Also assume that financial markets expect the one-year interest rate next year to be 5, and expect the one-year rate to be 6 the year after that. Given this information, the yield to maturity on a three-year bond will be approximately

A) 4.
B) 5.
C) 6.
D) 15.

Question 2

Which of the following events will cause the interest rate to increase?

A) an open market sale of bonds
B) an increase in the reserve deposit ratio (i.e., )
C) an increase in income
D) all of the above