What role does forecast of future interest rates play

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You have $5000 to invest for the next year and are considering three alternatives.

a) a money market fund with an average maturity of 30 days offering a current yield of 3% per year.

b) a 1-year savings deposit at a bank offering an interest rate of 4%

c) a 20-year U.S treasury bond offering a yield to maturity of 5% per year.

Problem 1: What role does your forecast of future interest rates play in your decision?

Reference no: EM132962831

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