Suppose the Term Structure of Interest Rates Is Shown Below

question 23

Multiple Choice

Suppose the term structure of interest rates is shown below:

Consider an investment that pays $1900 certain at the end of each of the next four years. If the investment costs $6650 and has a net present value (NPV) of $142.31, then the four year risk-free interest rate is closest to ________.

• A) 4.01%
• B) 3.51%
• C) 5.01%
• D) 4.51%

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