In return for an investment of $34318 in a fixed interest security, you will receive $134 at the end of each half year plus your money back on redemption in 12 years. You intend to deposit all the proceeds in a bank account that will pay an effective rate of interest of 4% per annum.

Given the current annual CPI rate is effectively 1%, objectively evaluate this opportunity. Are there any other factors to consider?

Answer rating: 100% (QA)

To evaluate this investment opportunity we need to calculate the present value PV of the cash flows from the fixed interest security and compare it to ... View the full answer