Suppose that the annual interest rate this year is 5%, and financial market participants expect the annual interest rate to increase to 5.5% next year, to 6% two years from now, and to 6.5% three years from now. What is the yield to maturity (approximate) on a one-year bond?

Select one:

a.

5%

b.

5.5%

c.

6.0%

d.

5.75%