Suppose the Term Structure of Interest Rates Is Shown Below

question 43

Multiple Choice

Suppose the term structure of interest rates is shown below: The net present value (NPV) of an investment that costs $4320 and pays $1600 certain at the end of one, three, and five years is closest to ________.

• A)$91.37
• B)$137.05
• C)$114.21
• D)-$114.21

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Definitions:

Price-Earnings Ratio

A valuation metric comparing the current share price of a company to its per-share earnings.

Year 2

A reference to the second year in a time series analysis or the second year of a company's operations or financial reporting.

Price-Earnings Ratio

A metric that compares the current price of a company's stock to its earnings per share.

Year 2

Typically refers to the second year of operation or existence in various contexts such as financial reporting, business planning, or academic studies.