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
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​(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
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
​$896​?
a.  If the appropriate discount rate is
9
​percent, the present value of this investment is
​$nothing.
​(Round to the nearest​ cent.)
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