Question: Please answer A - C and show your work :) Suppose the term structure of risk - free interest rates is as shown here: a
Please answer AC and show your work :) Suppose the term structure of riskfree interest rates is as shown here:
a Calculate the present value of an investment that pays $ in years and $ in years for certain.
b Calculate the present value of receiving $ per year, with certainty, at the end of the next years. To find the rates for the missing years in the table, linearly
interpolate between the years for which you do know the rates. For example, the rate in year would be the average rate in year and year
c Calculate the present value of receiving $ per year, with certainty, for the next years. Infer rates for the missing years using linear interpolation. Hint: Use
a spreadsheet.
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