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Suppose the Term Structure of Interest Rates Is Shown Below

Question 23

Multiple Choice

Suppose the term structure of interest rates is shown below:
Suppose the term structure of interest rates is shown below: Consider an investment that pays $1900 certain at the end of each of the next four years. If the investment costs $6650 and has a net present value (NPV) of $142.31, then the four year risk-free interest rate is closest to ________. A) 4.01% B) 3.51% C) 5.01% D) 4.51%
Consider an investment that pays $1900 certain at the end of each of the next four years. If the investment costs $6650 and has a net present value (NPV) of $142.31, then the four year risk-free interest rate is closest to ________.


A) 4.01%
B) 3.51%
C) 5.01%
D) 4.51%

Correct Answer:

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