Assume that the following data on U.S. Treasury securities is current:
-Refer to the information above. What is the implied annualized interest rate on a 10-year bond that is issued 10 years from today.
A)1.82%
B)4.97%
C)6.24%
D)9.08%

Question

Assume that the following data on U.S. Treasury securities is current: 
-Refer to the information above. What is the implied annualized interest rate on a 10-year bond that is issued 10 years from today.
A)1.82% 
B)4.97% 
C)6.24% 
D)9.08%

Quizplus · Accepted Answer

The implied annualized interest rate on a 10-year bond issued 10 years from today can be derived from the forward rates or the yield curve, which are not directly provided in the question. However, given the choices, 4.97% is a plausible rate for a long-term bond in a normal interest rate environment, reflecting expectations for inflation and risk over a decade. The other rates seem too low or too high for a 10-year bond in a standard economic scenario.

Assume That the Following Data on U