Use the table for the question(s) below.
Consider the following zero-coupon yields on default-free securities:

-The forward interest rate is a good predictor only when investors ________ about risk.
A) care
B) do not care
C) are indifferent
D) None of the above

Question

Use the table for the question(s) below.
Consider the following zero-coupon yields on default-free securities:
 
-The forward interest rate is a good predictor only when investors ________ about risk.
A) care 
B) do not care 
C) are indifferent 
D) None of the above

Quizplus · Accepted Answer

The forward interest rate assumes that investors do not care about risk, so it is only a good predictor when investors do not care about risk.

Use the Table for the Question(s) Below