Homework SourseA bank offers to sell a bank note that will reach a maturity
A bank offers to sell a bank note that will reach a maturity value of $12,000 in 12 years. How much should you pay for it now if you wish to receive an 8% return on your investment?
Question 11 options:
1) $925.93
2) $4594.71
3) $11,040.00
4) $920.00
Question 11 options:
1) $925.93
2) $4594.71
3) $11,040.00
4) $920.00
Solution
One thing that is not explicitly stated but that you determine by reviewing the answer choices is that the 8% return is a continuous rate of return. Then, as the note is for 12 years,
Pert = Pe.08(12) = Pe.96 = 12000
P = 12000/e.96 12000/2.61169647342312 4594.71463170134 4594.71
2)
