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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%)

  1. 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%

The net present value (NPV) of an investment that costs $4320 and pays $1600 certain at the end of one, three, and five years is closest to ________.

A) $91.37

B) $137.05

C) $114.21

D) -$114.21

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