KpossibleRisk-Free Rate. What is a risk-free rate? Give an example of an investment with a riskfree rate. Why is there no risk?A risk-free rate is: (Select the best answer below.)OA. an interest rate that is not guaranteed on an investment for a specified period.OB. an interest rate guaranteed on an investment for a unspecified period.OC. an interest rate guaranteed on an investment for a specified period.OD. an interest rate that is not guaranteed on an investment for an unspecifiedperiod.There is no risk because a risk-free investment: (Select the best answer below.)OA. pays an interest rate guaranteed on an investment for an unspecified period.OB. would pay investors even if the financial institution went into bankruptcy.OC. is a checking account.OD. is a zero interest loan.

Please refer below page.If you have any questions feel free to ask.Explanation:

Answered: K possible Risk-Free Rate. What is a…

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

See similar textbooks

Similar questions

Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
. 1. In general, financial assets that have a(n) higher; higher lower; higher higher; lower equal; higher 2. The more liquid markets are the: lower the interest rates, and the lower the amount of investment. higher the interest rates, and the higher the amount of investment. lower the interest rates, and the higher the amount of investment. higher the interest rates, and the lower the amount of investment. 3. When purchasing a future contract, the buyer of a futures contract: • agrees to pay the seller later where the payment is based on the future price of some asset. assumes very little risk of the future price fluctuation of some asset. must pay a set amount to the seller regardless of what the future price turns out to be. none of these are true. 4. Those who believe that market prices always incorporate all available information believe: in the efficient-market hypothesis. • that randomly choosing a stock is not as effective as technical or fundamental analysis. that current stock…
What impact does each of the followingparameters have on the value of a call option?(4) Risk-free rate
A forward rate is the mathematical expectation of a future spot rate in risk neutral world. O True False
Theta measures an option's: Multiple Choice O O intrinsic value. volatility. rate of time decay. sensitivity to changes in the value of the underlying asset. sensitivity to changes in the risk-free rate.
An investment requires a total return that comprises: O a real rate of return and compensation for inflation. a real rate of return, compensation for inflation, and a risk premium. compensation for inflation and a risk premium. a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. None of the above
Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? O FV = PV / (1+1)N O FV = PV + (PV XIX N) O FV = PV x (1 + I)N Simple interest? OFV = PV + (PV XIX N) O FV = PV XIX N O FV = PV/(PV XIX N)
Macaulay duration is the optimal holding period to immunize the interest rate risks, namely to make the reinvestment risk and selling price risk offset one another completely. O True O False
With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to price
. Suppose interest rates are increasing enough that it can be modeled with r →∞.(a) What is the value of a Call?(b) What is the value of a Put?(c) Explain both answers in terms of finance.
What does WRF = -0.50 mean? Group of answer choices The investor can borrow money at the risk-free rate. The investor can lend money at the current market rate. The investor can borrow money at the current market rate. The investor can borrow money at the prime rate of interest. The investor can lend money at the prime rate of interest.
mc question attached

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS