You are considering investing in a security that will pay you $5,000 in 32 years. a. If the appropriate discount rate is 9 percent, what is the present value of this investment? b. Assume these investments sell for $896 in return for which you receive $5,000 in 32 years. What is the rate of return investors earn on this investment if they buy it for $896?
You are considering investing in a security that will pay you $5,000 in 32 years. a. If the appropriate discount rate is 9 percent, what is the present value of this investment? b. Assume these investments sell for $896 in return for which you receive $5,000 in 32 years. What is the rate of return investors earn on this investment if they buy it for $896?
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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Question
(Related to Checkpoint 5.6) (Solving for
i)
You are considering investing in a security that will pay you
$5,000
in
32
years.a. If the appropriate discount rate is
present value of this investment?
9
percent,
what is the b. Assume these investments sell for
rate of return investors earn on this investment if they buy it for
$896
in return for which you receive
$5,000
in
32
years. What is the $896?
a. If the appropriate discount rate is
9
percent, the present value of this investment is
$nothing.
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