You have the chance to buy a guaranteed promissory note for $850. The note pays $1,000 in 15 months (i.e., exactly 456 days). You have $850 in a bank account that pays a 7% nominal rate compounded daily. Which is a better investment, the note or the bank account? Answer this question using three approaches: (1) compare your future value if you buy the note versus leaving your money in the bank; (2) compare the PV of the note with your current bank balance; and (3) compare the effective rate or return on the note with that of the bank account.

Suppose someone offered to sell you a note (an investment) that calls for $1,000 payment two years from today. The person offers to sell the note for $880. You have $880 in a bank time deposit (savings instrument) that pays a 6.766492 percent simple rate with daily compounding, which is a 7 percent effective annual interest rate; and you plan to leave this money in the bank unless you buy the note. The note is not risky — that is, you are sure it will be paid on schedule. a. Should you buy the note? Check the decision in three ways: i. by comparing your future value if you buy the note versus leaving your money by comparing the pv of the note with your current bank investments and by comparaing the r earon the note with your current bank

Suppose someone offered to sell you a note calling for the payment of $1,200 in three years. They offer to sell it to you for $880.  You have $880 deposit in a bank that pays a 9.5% nominal rate with daily compounding, and you plan to leave the money in the bank unless you buy the note.  The note is not risky--you are sure it will be paid on schedule.  Should you buy the note?  Check the decision in three ways:  (1) by comparing your future value if you buy the note versus leaving your money in the bank, (2) by comparing the present value of the note with your current bank account, and (3) by comparing the effective annual rate on the note versus that of the bank account.

Suppose someone offered to sell you a note calling for the payment of $1,000 15 months from today. They offer to sell it to you for $850.  You have $850 in a bank time deposit which pays a 7% effective annual interest rate (compounding), and you plan to leave the money in the bank unless you buy the note.  The note is not risky--you are sure it will be paid on schedule.  Should you buy the note?