SOA Exam FM Sample Question 222
Study guide: Exam FM-2
You are given the following term structure of interest rates:
| Length of investment in years | Spot rate |
|---|---|
| 1 | 7.50% |
| 2 | 8.00% |
| 3 | 8.50% |
| 4 | 9.00% |
| 5 | 9.50% |
Calculate the one-year annual effective rate for the fifth year implied by this term structure.
- A) 9.0%
- B) 9.5%
- C) 10.0%
- D) 10.5%
- E) 11.5%
Answer this question and see the worked solution