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Category > Accounting Posted 25 Apr 2017 My Price 2.00

Required Rate of Return

Required Rate of Return

A money market security that has a par value of $10,000 sells for $8,816.60.

Given that the security has a maturity of two years, what is the investor’s required rate of return?

 

 

Answers

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Status NEW Posted 25 Apr 2017 09:04 AM My Price 2.00

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file 1493110929-Answer.docx preview (53 words )
R-----------equ-----------ire-----------d R-----------ate----------- of----------- Re-----------tur-----------n A----------- mo-----------ney----------- ma-----------rke-----------t s-----------ecu-----------rit-----------y t-----------hat----------- ha-----------s a----------- pa-----------r v-----------alu-----------e o-----------f $-----------10,-----------000----------- se-----------lls----------- fo-----------r $-----------8,8-----------16.-----------60.----------- Gi-----------ven----------- th-----------at -----------the----------- se-----------cur-----------ity----------- ha-----------s a----------- ma-----------tur-----------ity----------- of----------- tw-----------o y-----------ear-----------s, -----------wha-----------t i-----------s t-----------he -----------inv-----------est-----------orâ-----------€™s----------- re-----------qui-----------red----------- ra-----------te -----------of -----------ret-----------urn-----------? -----------Ans-----------wer-----------: -----------100-----------00 -----------= 8-----------816-----------*(1-----------+i)-----------^2 ----------- (1-----------+i)-----------^2 -----------= 1-----------000-----------0/8-----------816----------- (-----------1+i-----------)^2----------- = -----------1.1-----------343----------- T-----------ake----------- th-----------e s-----------qua-----------re -----------roo-----------t o-----------f b-----------oth----------- si-----------des----------- (-----------1+i-----------) =----------- 1.-----------065----------- i----------- = -----------6.5-----------% a-----------ppr-----------ox.----------- -----------
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