question archive You wish to know the appropriate price for a security that matures in 48 years
You wish to know the appropriate price for a security that matures in 48 years
Subject:FinancePrice:2.86 Bought3
| You wish to know the appropriate price for a security that matures in 48 years. The security has a payout of $984,460.81, which is paid in one lump sum at maturity. | ||||||||||
| The interest rate associated with this class of security is 14.07%, and interest is compounded annually. What is the current price of this security? |
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The current price is computed as shown below:
= Future value / (1 + interest rate)time period
= $ 984,460.81 / 1.140748
= $ 984,460.81 / 554.918488
= $ 1,774.06 Approximately
