Question: FULL SOLUTION WITH ALL STEPS AND CALCULATION Assume that you inherited some money. A friend of yours is working as an unpaid inter.1 local brokerage

FULL SOLUTION WITH ALL STEPS AND CALCULATION Assume that you inherited

FULL SOLUTION WITH ALL STEPS AND CALCULATION

Assume that you inherited some money. A friend of yours is working as an unpaid inter.1 local brokerage firm, and her boss is selling some securities that call for 4 payments, $50 2t end of each of the next 3 years, plus a payment of S1,050 at the end of Year 4. Your friends she can get you some of these securities at a cost of $900 each. Your money is now inves: 1 in a bank that pays an 8 percent nominal (quoted) interest rate, but with quarterly compounding. You regard the securities as being just as safe, and as liquid, as your bank deposit, so your re- quired effective annual rate of return on the securities is the same as that on your bank deposit. You must calculate the value of the securities to decide whether they are a good investment. What is their present value to you

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