Question
The current term structure of interest rates is shown in the table below. Years 1 2 3 4 5 6 Spot Rate 6.0% 7.5% 8.0%
The current term structure of interest rates is shown in the table below.
| Years | 1 | 2 | 3 | 4 | 5 | 6 |
| Spot Rate | 6.0% | 7.5% | 8.0% | 8.5% | 9.0% | 9.5% |
Betty and Al agree to use the current term structure to lock in an interest rate for a future loan. Three years from now, Betty will loan Al $1,000. Two years later, Al will repay Betty $X. Find X.
(A) 1166
(B) 1183
(C) 1188
(D) 1221
(E) 1232
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Financial Management In The Public Sector Tools Applications And Cases
Authors: Xiaohu Wang
3rd Edition
0765636891, 9780765636898
