A security promises to pay you $40 every six months for 10 years and at the end of year 10, it will pay you an additional $1,000. If you buy it at $1,100, what is the (annual) return on your investment?

A security promises to pay you $40 every six months for 10 years and at the end of year 10, it will pay you an additional $1,000. If you buy it at $1,100, what is the (annual) return on your investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

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Question

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A security promises to pay you $40 every six months for 10 years and at the end of year 10, it
will pay you an additional $1,000. If you buy it at $1,100, what is the (annual) return on your
investment?
Hint: The number of semi-annual payments for 10 years should be 20.
O 3.31%
8%
6.62%
None of the above

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