Author Question: Use the table for the question(s) below.Suppose the term structure of interest rates is shown ... (Read 51 times)

joe · **on:** Jul 9, 2019

Use the table for the question(s) below.

Suppose the term structure of interest rates is shown below:

Term	1 year	2 years	3 years	5 years	10 years	20 years
Rate (EAR%)	5.00%	4.80%	4.60%	4.50%	4.25%	4.15%

Consider an investment that pays $1000 certain at the end of each of the next four years. If the investment costs $3,500 and has a net present value (NPV) of $74.26, then the four year risk-free interest rate is closest to:
◦ 4.55%
◦ 4.5%
◦ 4.53%
◦ 4.58%

joshbk44 · **Reply #1 on:** Jul 9, 2019

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