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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 407 Weeks Ago, 5 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a
local brokerage firm, and her boss is selling securities that call for 4 payments of $50 (1
payment at the end of each of the next 4 years) plus an extra payment of $1,000 at the end of
Year 4. Your friend says she can get you some of these securities at a cost of $900 each. Your
money is now invested in a bank that pays an 8% nominal (quoted) interest rate but with
quarterly compounding. You regard the securities as being just as safe, and as liquid, as your
bank deposit, so your required effective annual rate of return on the securities is the same as
that on your bank deposit. You must calculate the value of the securities to decide whether
they are a good investment. What is their present value to you?
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