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Carlos would like to invest a certain amount of money for two years and considers investing in a one - year bond that pays 6
Carlos would like to invest a certain amount of money for two years and considers investing in a oneyear bond that pays percent and a twoyear bond that pays percent. Carlos is considering the following investment strategies:
Strategy A: Buy a oneyear bond that pays percent and in year one, then buy another oneyear bond that pays the forward rate in year two.
Strategy B: Buy a twoyear bond that pays percent in year one and percent year two.
If the oneyear bond purchased in year two pays percent, and the liquidity premium on a twoyear bond is percent, Carlos will choose
Which of the following describes conditions under which Carlos would be indifferent between Strategy A and Strategy B
The rate on the oneyear bond purchased in year two is percent.
The rate on the oneyear bond purchased in year two is percent.
The rate on the oneyear bond purchased in year two is percent.
The rate on the oneyear bond purchased in year two is percent.
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