Expectations theory-what is current two-year rate

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Reference no: EM132009574

1. Suppose you are going to receive $14,400 per year for six years. The appropriate interest rate is 9.5 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? b. What is the present value if the payments are an annuity due?

2. Break-even is the number of units at which a. total revenue equals price times quantity b. total revenue equals total variable cost c. total revenue equals total fixed cost d. total profit equals total cost e. total revenue equals total cost

3. The one year spot interest rate is 5.50% and the one-year forward rate next year is 6.0%. According to the expectations theory, what is the current two-year rate?

Reference no: EM132009574

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