What is the annualized risk free rate in this example

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Reference no: EM132819902

Question - If you invest $3000 dollars in an account which will pay you 6% annually, if you never touch the money, how much money will you have in ten years? If you invest $3000 dollars in an account which will pay you 12% annually, how much money will you have in ten years?

You would like to buy the following car: Unfortunately it costs $25,000, it you want to the purchases the car in five years and in the meantime you can place money in a bank account that pays 10% interest per year, how much money do you need to put into your account today to be able to buy this car in five years?

A friend of yours tells you that in Japan a specific Japanese treasury note matures for $1000 in two years can be bought or sold for $925. What is the annualized risk free rate in this example? You happen to notice the same security can be purchased or sold domestically for $945, how do you arbitrage this position? How many times should you make this trade? How likely is it that your friend's information is current and correct?

Reference no: EM132819902

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