Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. What is the one-year forward rate two years from now?
A) 12.67 percent
B) 113 percent
C) 195 percent
D) 15.67 percent
E) None of these are correct.
Correct Answer:
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