Suppose a security with a risk-free cash flow of $1000 in one year trades for $909 today.If there are no arbitrage opportunities,then the current risk-free interest rate is closest to:
A)8%
B)10%
C)11%
D)12%

Name: Suppose a security with a risk-free cash flow of $1000 in one year trades for $909 today.If there are no arbitrage opportunities,then the current risk-free interest rate is closest to: A)8% B)10% C)11% D)12%
Brand: Quizplus
Rating: 4.8 (41 reviews)

Question

Quizplus · Accepted Answer

B)PV = FV/(1 + i)→ (1 + i)= FV/PV = $1000/$909 = 1.10 so i = 10%

Suppose a Security with a Risk-Free Cash Flow of $1000