If the one-year and two-year interest rates are 6.5% and 7% respectively, what should be the forward rate for year 2 (according to the expectations theory)?

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 8MC: Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future...
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If the one-year and two-year interest rates are 6.5% and 7% respectively, what should be the
forward rate for year 2 (according to the expectations theory)?
7%
7.5%
7.75%
7.25%
6.75%.
6.5%
Transcribed Image Text:If the one-year and two-year interest rates are 6.5% and 7% respectively, what should be the forward rate for year 2 (according to the expectations theory)? 7% 7.5% 7.75% 7.25% 6.75%. 6.5%
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