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Suppose the term structure of risk-free interest rates is as shown below: a. Calculate the present value of an investment that pays $5,000 in two

image text in transcribed Suppose the term structure of risk-free interest rates is as shown below: a. Calculate the present value of an investment that pays $5,000 in two years and $2,000 in five years for certain. the rate in year four would be the average rate in year three and year five) c. Calculate the present value of receiving $2,300 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) a. Calculate the present value of an investment that pays $5,000 in two years and $2,000 in five years for certain. The present value of the investment is $ (Round to the nearest dollar.) the rate in year four would be the average rate in year three and year five.) The present value of the investment is . (Round to the nearest dollar.) c. Calculate the present value of receiving $2,300 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) The present value of the investment is (Round to the nearest dollar.)

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