You are given the following term structure of spot interest rates: Time (in years) Spot Interest Rate 3% 2 3.5% 3. 4% 4. 5% A three-year annuity-immediate will be issued a year from now with annual payments of 1.000. Using the forward rates calculate the present value of this annuity a year from now. A. 2643 B. 2725 OC 2828 O D. 2905 E. 3021

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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You are given the following term structure of spot interest rates:
Time (in years)
Spot Interest Rate
3%
2.
3.5%
3.
4%
4.
5%
A three-year annuity-immediate will be issued a year from now with annual payments of 1.000. Using the forward rates, calculate the present value of
this annuity a year from now.
O A. 2643
OB. 2725
OC. 2828
D. 2905
O E. 3021
Transcribed Image Text:You are given the following term structure of spot interest rates: Time (in years) Spot Interest Rate 3% 2. 3.5% 3. 4% 4. 5% A three-year annuity-immediate will be issued a year from now with annual payments of 1.000. Using the forward rates, calculate the present value of this annuity a year from now. O A. 2643 OB. 2725 OC. 2828 D. 2905 O E. 3021
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