3.8 The following table shows the spot rates of interest over a number of horizons: (a) Find the present value of payments of $100 at the end of each year for 4 years. Period of investment (in years) Spot rate (in %) 1 6.00 2 7.00 3 7.75 4 8.25
3.8 The following table shows the spot rates of interest over a number of horizons: (a) Find the present value of payments of $100 at the end of each year for 4 years. Period of investment (in years) Spot rate (in %) 1 6.00 2 7.00 3 7.75 4 8.25
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3.8 The following table shows the spot rates of interest over a number of horizons:
(a) Find the
| Period of investment (in years) | Spot rate (in %) |
| 1 | 6.00 |
| 2 | 7.00 |
| 3 | 7.75 |
| 4 | 8.25 |
![3.8 The following table shows the spot rates of interest over a number of hori-
zons:
Period of investment (in years) Spot rate (in %)
6.00
2
7.00
3
7.75
4
8.25
(a) Find the present value of payments of $100 at the end of each year for
4 years.
(b) What is the effective rate of interest earned by this annuity-immediate
if it were constant through the whole investment period? [Hint: Use
the Excel function Rate to compute the rate of interest.]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb9a6b52c-07c6-40c7-93a2-b59eac1f7768%2Fbce5ded1-2aa1-4e53-b49e-1b05ee8dff22%2Fzzsptah_processed.png&w=3840&q=75)
Transcribed Image Text:3.8 The following table shows the spot rates of interest over a number of hori-
zons:
Period of investment (in years) Spot rate (in %)
6.00
2
7.00
3
7.75
4
8.25
(a) Find the present value of payments of $100 at the end of each year for
4 years.
(b) What is the effective rate of interest earned by this annuity-immediate
if it were constant through the whole investment period? [Hint: Use
the Excel function Rate to compute the rate of interest.]
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