Consider an Investment That Pays $1,000 with Certainty at the End

question 25

Multiple Choice

Consider an investment that pays $1,000 with certainty at the end of each of the next four years.If the investment costs $3,500 and has an NPV of $74.26,then the four year risk-free interest rate is closest to:

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

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Definitions:

Firm's Cash Cycle

The time period it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Investments In Inventory

Funds allocated towards purchasing goods for sale or raw materials to produce goods, aiming at generating future revenues.

Restrictive Policy

A policy designed to limit or restrict certain behaviors, actions, or practices, typically in a financial or regulatory context.

Marketable Securities

Short-term financial instruments that are easily convertible into cash at a relatively stable market price.