Consider an Investment That Pays $1000 Certain at the End

question 27

Multiple Choice

Consider an investment that pays $1000 certain 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)4.5%
• B)4.58%
• C)4.55%
• D)4.53%
• E)5.0%

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Definitions:

PPOs

Preferred Provider Organizations, a type of health plan that contracts with medical providers to create a network of preferred doctors and hospitals for its members.

DRG Payment System

The Diagnosis-Related Group (DRG) payment system is a method used by Medicare and some other insurance programs to categorize hospitalization costs and determine how much to pay for a patient's hospital stay.

Fee-For-Service System

A pricing structure where services are itemized and each is charged individually.

Health Care Expenses

The costs associated with medical care, including treatments, medications, hospital stays, and other related expenses.