A local bank is running the following advertisement: For just $1000 we will pay you $80 forever!
Question:
A local bank is running the following advertisement: “For just $1000 we will pay you $80 forever!” The fine print says that for a $1000 deposit, the bank will pay $80 every year in perpetuity, starting one year after the deposit is made. What interest rate is the bank advertising (what is the rate of return of this investment)?
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The banks advertisement is misleading While it claims an infinite return for a 1000 deposit its not ...View the full answer
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Muhammad Haroon
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9781292437156
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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