Suppose someone offered to sell you a note calling for the payment of $1,000 in 15 months. They offer to sell it to you for $850. You have $850 in a bank time deposit that pays a 6.76649% nominal rate with daily compounding, which is a 7% effective annual interest rate, 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 PV of the note with your current bank account; and
3. by comparing the EFF% on the note with that of the bank account.