You are offered a note which pays K1,000 in 15 months (or 456 days) for K850. You have K850 which pays a 6.76649% nominal rate, with 365 daily compounding, which is a daily rate of .018538% and an EAR of 7%. You plan to leave the money in the bank if you do not buy the note. The note is riskless. Should you buy it? Show your computations of how you arrive at the decision.
You are offered a note which pays K1,000 in 15 months (or 456 days) for K850. You have K850 which pays a 6.76649% nominal rate, with 365 daily compounding, which is a daily rate of .018538% and an EAR of 7%. You plan to leave the money in the bank if you do not buy the note. The note is riskless. Should you buy it? Show your computations of how you arrive at the decision.
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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| You are offered a note which pays K1,000 in 15 months (or 456 days) for K850. You have K850 which pays a 6.76649% nominal rate, with 365 daily compounding, which is a daily rate of .018538% and an EAR of 7%. You plan to leave the money in the bank if you do not buy the note. The note is riskless. Should you buy it? Show your computations of how you arrive at the decision. |
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