With $10,000 available, you have two investment options. The first option is to buy a certificate of deposit from a bank at an interest rate of 10% annually for five years. The second choice is to purchase a bond for $10,000 and invest the bond's interest payments in the bank at an interest rate of 9%. The bond pays 10% interest annually and will mature at its face value of $10,000 in five years. Which option is better? Assume your MARR is 9% per year.
With $10,000 available, you have two investment options. The first option is to buy a certificate of deposit from a bank at an interest rate of 10% annually for five years. The second choice is to purchase a bond for $10,000 and invest the bond's interest payments in the bank at an interest rate of 9%. The bond pays 10% interest annually and will mature at its face value of $10,000 in five years. Which option is better? Assume your MARR is 9% per year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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With $10,000 available, you have two investment options. The first option is to buy a certificate of deposit from a bank at an interest rate of 10% annually for five years. The second choice is to purchase a bond for $10,000 and invest the bond's interest payments in the bank at an interest rate of 9%. The bond pays 10% interest annually and will mature at its face value of $10,000 in five years. Which option is better? Assume your MARR is 9% per year.
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