Assume that you inherited some money. A friend of yours is working
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 $850 each. Your money is now invested in a bank that pays an 10% 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 View complete question » 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 $850 each. Your money is now invested in a bank that pays an 10% 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? Round your answer to the nearest cent.
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