The term structure of risk-free Canadian interest rates provides the yield curve that can be used to compute
A) present value of a risk-free cash flow over different investment horizons.
B) future value of a risk-free cash flow over different investment horizons.
C) both present and future values of a risk-free cash flow over different investment horizons.
D) none of the above.

Question

Quizplus · Accepted Answer

The term structure of risk-free Canadian interest rates, represented by the yield curve, can be used to compute both the present and future values of a risk-free cash flow over different investment horizons. This is because the yield curve reflects the interest rates for different maturities, which are essential for calculating present and future values.

The Term Structure of Risk-Free Canadian Interest Rates Provides the Yield