Suppose the current one- year interest rate is 6%, and financial markets expect the one- year interest rate next year to be 7%, and expect the one- year rate to be 8% the year after that. Given this information, the yield to maturity on a three- year bond will be:
A) 22%.
B) 18%.
C) 10%.
D) 7%.
E) 12%.
Correct Answer:
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