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5. Suppose the term structure of interest rates is shown below: Term 1 year 2 years 3 years 5 years 10 years 20 years Rate

5. 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%

What is the NPV of an investment that costs $2500 and pays $1000 certain at the end of one, three, and five years?

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