Use the following information to answer the question(s) below.
An exchange traded fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of two shares of Apple Inc. (APPL), one share of Google (GOOG), and ten shares of Microsoft (MSFT). Suppose the current stock prices of each individual stock are as shown below:

-Suppose that a security with a risk-free cash flow of $1000 in one year trades for $930 today.If there are no arbitrage opportunities,then the current risk-free rate is closest to:
A) 6.0%
B) 6.5%
C) 7.0%
D) 7.5%
E) 8.0%

Question

Use the following information to answer the question(s) below.
An exchange traded fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of two shares of Apple Inc. (APPL), one share of Google (GOOG), and ten shares of Microsoft (MSFT). Suppose the current stock prices of each individual stock are as shown below:
 
-Suppose that a security with a risk-free cash flow of $1000 in one year trades for $930 today.If there are no arbitrage opportunities,then the current risk-free rate is closest to:
A) 6.0% 
B) 6.5% 
C) 7.0% 
D) 7.5% 
E) 8.0%

Quizplus · Accepted Answer

D) i = $1000/$930 - 1 = 0.075269 or approx 7.5%

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