An investment opportunity has the following characteristics: payments of $10,000 will be made to you and invested into a fund at the beginning of each year, for the next 20 years. These payments will earn a 7% effective annual rate, and the interest payments (paid at the end of each year) will immediately be reinvested into a second account earning a 4% effective annual rate. Find the purchase price of this investment opportunity, given that it has an annual yield of 6% over the 20- year life of the investment.
An investment opportunity has the following characteristics: payments of $10,000 will be made to you and invested into a fund at the beginning of each year, for the next 20 years. These payments will earn a 7% effective annual rate, and the interest payments (paid at the end of each year) will immediately be reinvested into a second account earning a 4% effective annual rate. Find the purchase price of this investment opportunity, given that it has an annual yield of 6% over the 20- year life of the investment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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