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Suppose the term structure of interest rates is shown below: 10 20 Term 1 year 2 years 3 years 5 years years years Rate
Suppose the term structure of interest rates is shown below: 10 20 Term 1 year 2 years 3 years 5 years years years Rate 5.00% 4.70% 4.40% 4.30% 4.25% 4.15% (EAR%) Consider an investment that pays $1000 certain at the end of each of the next four years. If the investment costs $3500 and has an NPV of $74.26, then the four year risk-free interest rate is closest to: O 4.50% 4.53% O 4.73% O 4.60%
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