Suppose a security with a risk-free cash flow of
$ 152$152
in one year trades for
$ 138$138
today. If there are no arbitrage opportunities, what is the current risk-free interest rate?
The risk-free rate is
nothing%.
(Round to two decimal places.)
Given that,
Maturity value of Security with Risk free cash flow after 1 year = $152
Today's trading price of the security = $ 138
This means Risk free return in one-year = $152 - $138 = $14
Therefore, Risk free rate of return = Risk Free Return / Today's trading price *100
= ($ 14 / $ 138) *100 = 10.1449 % = 10.14%
Risk free Rate is 10.14% per year.
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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?
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