Suppose a security with a risk-free cash flow of $150 in one year trades for $140 today.

Question:

Suppose a security with a risk-free cash flow of $150 in one year trades for $140 today. If there are no arbitrage opportunities, what is the current risk-free interest rate?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance

ISBN: 978-0133097894

3rd edition

Authors: Jonathan Berk and Peter DeMarzo

See More Books

Question Posted: Jul 27, 2014 02:17 AM

See More Questions

Mastrade firm has free cash flow of 3,500,000 USD. When the firm was unlevered it had a cost of equity of 9%. Then it went for permanent leverage by borrowing 500,000 USD at 8% interest rate....
If there are no interventions by finance ministers or central banks in the international market, then a. The capital market will be greater than the current account. b. The capital market will equal...
A firm reported free cash flow of $430 million and operating income of $390 million. (a) By how much did its net operating assets change during the period? (b) The firm invested $29 million cash in...
Deuterium ( ) is an attractive fuel for fusion reactions because it is abundant in the oceans, where about 0.015% of the hydrogen atoms in the water (H 2 O) are deuterium atoms. (a) How many...
The three fundamental profit equations for call, puts, and stock are identified symbolically in this chapter as II = NC [Max (0, ST - X) - C] II = NP [Max (0, S - ST) - P] II = ST - S0. Prepare a...
A portion of the work sheet for Wilderness Rentals for the period ended December 31 follows. Using the information from the work sheet, prepare the journal entries to close the temporary accounts. 1....
What is the difference between a work group and a real team? AppendixLO1
Use the data from Problem 19 to rebalance the line with a cycle time of 90 seconds. How does the number of workstations change? What happens to the output and the lines efficiency?
As of this morning, a firm had a ledger balance of $1,252 with no outstanding deposits or checks. Today, the firm deposited three checks in the amount of $63 each and wrote a check in the amount of...
1. (4) A blood pressure of 110 mm Hg is measured using a cuff over the wrist which is positioned 30 cm above heart level. According to Bernoulli's equation(given below), what is the blood pressure at...
Consider two securities that pay risk-free cash flows over the next two years and that have the current market prices shown here: a. What is the no-arbitrage price of a security that pays cash flows...
Xia Corporation is a company whose sole assets are $100,000 in cash and three projects that it will undertake. The projects are risk-free and have the following cash flows: Xia plans to invest any...
Estimate the mean of the frequency distribution you made in Exercise 1. Exercise 1 Construct a frequency distribution for the data set using five classes. Include class limits, midpoints, boundaries,...
1.1 Indonesia is it potential as a market for Apple? 2.1 Examination of Apple's entry strategy into the international market? 2.2 Evaluation of the entry mode(s) employed by Apple and their...
Dynamic, a global media agency, has recently taken over MediaHype, a local agency in Melbourne, to expand its Australian operations. Jeff Tan, a Chinese national, has been appointed to head the new...
Linear optimization models play a crucial role in improving supply chain management efficiency, both in physical and abstract network problems. Three ways they can be applied are through optimizing...
When I consider optimizing the portfolio allocation for both my 403(b) and CALSTRS retirement accounts, I find it crucial to employ a well-structured model to ensure that my investments align with my...
How can you use your understanding of diversity to develop your relationship-building skills in your healthcare career?,Explain ways in which religion can help or hinder individuals as they build...
Differentiate between normative and positive stances of management accounting research.
1. Using the information from Problem 16-4B, prepare a statement of cash flows for Lim Garden Supplies Inc. using the direct method of presenting cash flows from operating activities. 2. How does Lim...
If a picture of a dog, the spoken word dog, and the written word DOG all regulate the same behavior, we say that the stimulus classes are: (a) overlapping (b) the same (c) equivalent (d) confounded
Suppose a companys cash flow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign?
Suppose a companys cash flow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign?
Suppose a companys cash flow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign?
September 23 for $1,050 each. On December 24 , it sold one of the diamonds that was purchased on July 9 . Using the specific identification method, its ending inventory (after the December 24 sale)...
Madsen Motors's bonds have 13 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 8%, and the yield to maturity is 10%. What is the...
Builder Products, Incorporated, uses the weighted - average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion....

Suppose a security with a risk-free cash flow of $150 in one year trades for $140 today.

Question:

Step by Step Answer:

The PV of the securitys cash flow is 150 in one year1 r where ...View the full answer

Corporate Finance

Students also viewed these Corporate Finance questions