Use the Table for the Question(s) Below -Consider an Investment That Pays $1000 at the End of Structure

question 78

Multiple Choice

Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:
$\begin{array} { l c c c c c c } \hline \text { Term } & \text { 1 year } & \text { 2 years } & \text { 3 years } & \text { 5 years } & \text { 10 years } & \text { 20 years } \\\hline \text { Rate } & & & & & & \\( \text { EAR\%) } & 5.00 \% & 4.80 \% & 4.60 \% & 4.50 \% & 4.25 \% & 4.15 \% \\\hline\end{array}$
-Consider an investment that pays $1000 at the end of each of the next four years. If the investment costs $3,500 and has a net present value (NPV) of $74.26, then the four-year risk-free interest rate is closest to:

• A) 4.55%
• B) 4.58%
• C) 4.5%
• D) 4.53%

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Definitions:

Conditioned Stimulus

An initially neutral stimulus that becomes associated with an unconditioned stimulus, leading to a conditioned response in classical conditioning.

Classical Conditioning

An instructional process where two stimuli are frequently paired together; the response, initially triggered by the second stimulus, is subsequently drawn by the first stimulus alone.

Extinction

In psychology, the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is repeatedly presented without the unconditioned stimulus.

Conditioned Stimulus

A stimulus that was originally neutral but, after association with an unconditioned stimulus, leads to eliciting a conditioned response.