Use the Following Information to Answer the Question(s)below

question 48

Multiple Choice

Use the following information to answer the question(s) below:
Suppose the term structure of risk-free interest rates is given as:
Term 1 year 2 years 3 years 5 years 10 years
Rate 2.25% 2.80% 3.20% 4.10% 6.30%
-The present value of an investment that pays $2000 in one year and $3000 in three years for certain is closest to:

• A)$4707.
• B)$4685.
• C)$4729.
• D)$5000.

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Definitions:

Direct Experience

A method of gaining knowledge through firsthand, personal experience rather than through secondhand information.

Aversion

A strong feeling of dislike or opposition towards something or someone.

Algebra

A branch of mathematics dealing with symbols and the rules for manipulating those symbols, representing numbers and relationships.

Social Learning

The process of deriving attitudes from family, peer groups, religious organizations, and culture.