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Eleanor would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 5 percent and
Eleanor would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 5 percent and a two-y bond that pays 8 percent. Eleanor is considering the following investment strategies: Strategy A: In the first year, buy a one-year bond that pays 5 percent. Once that bond matures, buy another one-year bond that pays the forward rate. Strategy B: In the first year, buy a two-year bond that pays 8 percent annually. If the one-year bond purchased in year two pays 9 percent, Eleanor will choose Which of the following describes conditions under which Eleanor would be indifferent between Strategy A and Strategy B? The rate on the one-year bond purchased in year two pays 11.086 percent. The rate on the one-year bond purchased in year two pays 11.529 percent. The rate on the one-year bond purchased in year two pays 11.973 percent. The rate on the one-year bond purchased in year two pays 9.423 percent
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