Suppose That a Security with a Risk-Free Cash Flow of $1000

question 77

Multiple Choice

Suppose that a security with a risk-free cash flow of $1000 in one year trades for $930 today.If there are no arbitrage opportunities,then the current risk-free rate is closest to:

• A)6.0%
• B)6.5%
• C)7.0%
• D)7.5%

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Definitions:

Contingency Approach

A theory suggesting that the best way to manage an organization depends on the circumstances, highlighting the need for flexibility in management practices.

Bureaucratic Management

An organizational management style that emphasizes a structured hierarchy, strict procedures, and a clear division of labor to achieve efficiency.

Total Quality Management

A comprehensive approach focused on continuously improving processes, products, and services by integrating all organizational functions toward achieving customer satisfaction.

Theory X and Y

A concept describing two contrasting models of workforce motivation developed by Douglas McGregor; Theory X assumes that employees are naturally unmotivated and dislike work, while Theory Y assumes that employees are self-motivated and thrive on responsibility.