A two-year STRIPS sells at an interest rate of 3.84% and a three-year STRIPS sells at a rate of 3.97%. What is the implied one-year interest rate two years from now? Assume the rates are effective annual rates.
A)4.23%
B)4.36%
C)4.41%
D)4.45%
E)4.50%

Question

Quizplus · Accepted Answer

The Answer of A two-year STRIPS sells at an interest rate of 3.84% and a three-year STRIPS sells at a rate of 3.97%. What is the implied one-year interest rate two years from now? Assume the rates are effective annual rates.
A)4.23%
B)4.36%
C)4.41%
D)4.45%
E)4.50%

A Two-Year STRIPS Sells at an Interest Rate of 3