Structure of interest rates for risk-free

Assignment Help Finance Basics
Reference no: EM131850993

Suppose the term structure of interest rates for risk-free zero-coupon bonds is as follows:

Term 1 year 2 year 3 year 4 year 5 year

Rate (EAR)% 4.00 3.50 3.00 2.50 2.00

What is the fair price if a risk-free investment that pays $1000 at the end of the Years 1,2, and 3, and given that price, what is the single rate of interest that could be used to fairly value this annuity? 

Please no excel and show all work

Reference no: EM131850993

Questions Cloud

Determine the accumulated value of the investment : (a) Determine the accumulated value of the investment at the end of 14 years. (2 decimal places)
What is the annual rate of return of purchase : Assume that part of the US is worth an average of $5,500 per acre in 2018. What is the annual rate of return of this purchase for the U.S.?
Weighted average cost of capital : Calculate the company's weighted average cost of capital. Use the dividend discount model. Clearly show calculations..
What role does reason play in personal understanding of evil : What role does reason play in your personal understanding of evil? How does that overlap or contradict with the major religions' uses of reason in explaining ev
Structure of interest rates for risk-free : Suppose the term structure of interest rates for risk-free zero-coupon bonds is as follows:
Expected to yield cash flows : Let's assume that a real estate investment is available at an initial cash outlay of $125,016 and is expected to yield cash flows of $27,500 per year for seven
Create a brochure that describes your program : Create a brochure that describes your program to potential clients (parents) through graphics and words.
Calculate earnings per share : Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
What is the firm eva : Its total invested capital is $20,000,000 and its after tax percentage cost of capital is 8%. What is the firm's EVA?

Reviews

Write a Review

Finance Basics Questions & Answers

  Provide explanation behind companys bubbly corporate value

Provide an explanation behind the company's bubbly corporate valuation during this time. Determine how outside investors were valuing this company. (Hint: look at similar businesses.)

  The following comparative income statement in thousands of

the following comparative income statement in thousands of dollars for the fiscal years 2008 and 2007 was adapted from

  Make a vertical analysis of income statement for two years

Make a vertical analysis of income statement for two years Using the data in these abbreviated income statements

  Identify the costs that you think would be considered

Identify the costs that you think would be considered in setting the product price, and come up with a sample cost structure for the product.

  Cculate the next expected dividend per share d1 hint d0

radon homess current eps is 7.87. it was 4.33 5 years ago. the company pays out 40 of its earnings as dividends and the

  What is the relationship between financial and strategic

what is the relationship between financial and strategic planning? what are some of the key financial policies for

  What is the estimated intercept term

With respect to the CAPM based model used to predict returns for a stock (shown on the security characteristic line), what is the estimated intercept term?

  What is the effective annual rate on a six-month loan

Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensating balance. You wish to obtain $250,000 in a six month loan.

  Payback period for an investment

What is the payback period for an investment with an initial outlay of $1m that has the following net cash inflows?

  What is meant by global wealth & investment anagement

How do commercial banks obtain their funds? What is financial restructuring advising? Provide an 2 2.The following is an excerpt from the 2009 Annual Report of Bank of America (p. 24)

  Erin griff manager of the cal division of the n corp is

erin griff manager of the cal division of the n corp is trying to decide whether to launch a new model of blender

  Capital gains yield and the expected return

Find the dividend yield, the capital gains yield and the expected return for this stock.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd