Suppose a security with a risk-free cash flow of $152 in one year trades for $137 today. If there are no arbitrage opportunities, what is the current risk-free interest rate?
Suppose a security with a risk-free cash flow of $152 in one year trades for $137 today. If there are no arbitrage opportunities, what is the current risk-free interest rate?
Homework Answers
step 1) 137= 152/ (1+r)
step2) 152/ 137= 1+r
1+r= 1.1094890511
1- 1.1094890511= r
r= 0.1094890511
Answer: r= 10.95
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