a. If the federal reserve has set the risk-free interest rate at 8 percent, the proper current price of this investment is $1,122.94.
b. The price of this investment if the federal reserve raises the risk-free interest rate to 10 percent is $1,087.14.
An interest rate is the amount of interest due in keeping with duration, as a share of the quantity lent, deposited, or borrowed (known as the foremost sum). the entire interest on a quantity lent or borrowed relies upon the predominant sum, the interest rate, the compounding frequency, and the duration of time over which its miles are lent deposited, or borrowed.
The once-a-year interest rate is the fee over a period of 12 months. different interest rates practice over distinct intervals, along with a month or an afternoon, however, they may be usually annualized.
The interest rate has been characterized as "an index of the desire . . . for a dollar of gift [income] over a greenback of future earnings." The borrower needs, or desires, to have money quicker as opposed to later and is inclined to pay a charge—the interest rate—for that privilege.
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