If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 in one year or A) $235.85 today. B) $250.00 today. C) $265.00 today. D) None of the above
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If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving
$250 in one year or
- A) $235.85 today.
- B) $250.00 today.
- C) $265.00 today.
- D) None of the above
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- If the rate of interest (r) is 9%, then you should be indifferent about receiving $9,500 in one year or ________.a) You invest 155 000 TL for a year. At the end the year, you have 174 375 TL net in your account. If the inflation realizes at %10 fot this year, calculate real rate of return? Can real interest rates be negative? Give a simple example?Suppose you just bought an annuity with 11 annual payments of $16,400 at a discount rate of 13.5 percent per year. What is the value of the investment at the current interest rate of 13.5 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What happens to the value of your investment if interest rates suddenly drop to 8.5 percent? Note: Do not round intermediate calculations and round
- Assume you invest $1 000 at the end of this year, at the end of the second year, and at the end of the third year. How much will you have at the end of the fourth year if interest rates are 5% p.a.? Select one: a. $3,405.54 b. $3,310.12 c. $3,215.41 d. $3,100,21What is the no arbitrage price of a risk-free investment that promises to pay $1,000 in one year? The risk-free interest rate is 3.5%. If you can purchase the investment for $950, do you have an arbitrage opportunity?Not too long ago, interest rates were essentially zero. If interest rates fall to 1/100th of a basis point (r = 0.000001), which of the following is true (if we round to the nearest dollar)? Select all that are true. A) the present value of the annuity will equal the sum of the annuity cash flows B) the future value of the annuity will equal the sum of the annuity cash flows C) the present value of the annuity will equal the future value of the annuity D) annuity values cannot be solved at a rate of 0.0001%
- You are considering the choice between investing £50,000 in a conventional 1-year financial asset such as (Certificate of Deposit) offering an interest rate of 5% and a 1-year “InflationPlus” offering 1.5% per year plus the rate of inflation. (a) Which is the safer investment and why? Which offers the higher expected return and why? If you expect the rate of inflation to be 3% over the next year, which is the better investment? Explain. If we observe a risk-free real rate of 5% per year and a risk-free real rate of 1.5% on inflation indexed bonds, can we infer that the market’s expected rate of inflation is 3.5% per year?What is the present value of $1,200 due in 14 years at a 5 percent interest rate and 11 percent interest rate? Do not round intermediate calculations. Round your answers to the nearest cent. Present value at 5%: $ Present value at 11%: $ Explain why the present value is lower when the interest rate is higher. The less interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. The more interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. The more interest you can earn during an investment period, the more you need to invest today to receive a particular amount in the future.Consider the followingalternatives: i. $120 received in one year ii. $220 received in five years iii. $350 received in 10 years a. Rank the alternatives from most valuable to least valuable if the interest rate is 7% per year. b. What is your ranking if the interest rate isonly 2% per year? c. What is your ranking if the interest rate is 14% per year?
- If the interest rate is 15%, what is the present value ofa security that pays you $1,100 next year, $1,250 theyear after, and $1,347 the year after that?Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semi-annually. If you make 20 consecutive semi-annual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20? Group of answer choices $52,821.19 $57,900.83 $58,988.19 $62,527.47 $64,131.50Which of the following statements is true? Group of answer choices If interest is 13% compounded annually, $1300 due one year from today is equivalent to $1,000 today. The higher the discount rate, the higher the present value. The process of accumulating interest on interest is referred to as discounting. If interest is 4% compounded annually, $1040 due one year from today is equivalent to $1000 today.