question archive Today annualized return for 1-year and 3-year securities are 7% and 12%, what is the annualized rate of return for 2-years securities beginning 1-year from now? 11
Today annualized return for 1-year and 3-year securities are 7% and 12%, what is the annualized rate of return for 2-years securities beginning 1-year from now? 11
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Today annualized return for 1-year and 3-year securities are 7% and 12%, what is the annualized rate of return for 2-years securities beginning 1-year from now? 11.22% 9.87% 12.81% 14.59%
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1R1 = 7%, 1R3 = 12%
Return on 2 year security, 1 year from now = [(1+1R3)^3/(1+1R1)^1] ^(1/2) - 1
Return on 2 year security, 1 year from now = [(1+0.12)^3/(1+0.07)^1]^(1/2) - 1 = 14.59%
ANSWER : 14.59%
