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Use the table for the question(s) below
Use the table for the question(s) below.
|
Security |
Cash flow today |
Cash flow in one year |
|
A |
0 |
100 |
|
B |
100 |
0 |
|
C |
100 |
100 |
a) If the risk-free rate of interest is 7.5%, then the value of security "A" is closest to:
A) $91.00
B) $92.50
C) $93.00
D) $100.00
b) If the risk-free rate of interest is 7.5%, then the value of security "B" is closest to:
A) $91.00
B) $92.50
C) $93.00
D) $100.00
c) If the value of security "C" is $180, then what must be the value of security "A"?
A) $80
B) $90
C) $100
D) Unable to determine without the risk-free rate.
Expert Solution
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