Use the Table for the Question(s) Below

question 92

Essay

Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:

-What is the net present value (NPV) of an investment that costs $2,500 and pays $1,000 at the end of one, three, and five years?

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Definitions:

Predictive Ability

The capability of a model or score to accurately forecast or estimate the likelihood of future outcomes or behaviors.

Reliability

The consistency of a test.

Validity

How well a test measures what it says it does.

Predictive Validity

The extent to which a score on a scale or test predicts future performance on a related outcome.