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:

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated by comparing the profit and the revenue.

P/E Ratio

Price to Earnings (P/E) ratio is a valuation metric that compares the price of a stock to its per-share earnings, indicating how much investors are willing to pay per dollar of earnings.

Earnings Per Share

A company's profit divided by the number of outstanding shares of its common stock.

Equity Multiplier

A financial leverage ratio that indicates the portion of a company’s assets that are financed by stockholder's equity, calculated by dividing total assets by total shareholders' equity.