Yakov would like to invest a certain amount of money for three years and considers investing in (1) a one-year bond that pays 4 percent, followed by a two-year bond, or (2) a three-year bond that pays 9 percent in each of the next three years. Yakov is considering the following investment strategies:

Strategy A:Buy a one-year bond that pays 4 percent in year one, then buy a two-year bond that pays the two-yearforward ratein years two and three.

Strategy B:Buy a three-year bond that pays 9 percent in each of the next three years.

If the two-year bond purchased one year from now pays 7 percent annually, Yakov will choose________ (Strategy A or B).

Which of the following describes conditions under which Yakov would be indifferent between Strategy A and Strategy B?

The rate on the one-year bond purchased one year from now is 10.662 percent.

The rate on the one-year bond purchased one year from now is 11.589 percent.

The rate on the one-year bond purchased one year from now is 12.168 percent.

The rate on the one-year bond purchased one year from now is 12.632 percent.