Assume that you inherited some money. A friend of yours is working as an unpaid...
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Finance
Assume that you inherited some money. A friend of yours is working as an unpaid intern at a
local brokerage firm, and her boss is selling securities that call for 4 payments of $200 (1
payment at the end of each of the next 4 years) plus an extra payment of $2,000 at the end of
Year 4. Your friend says she can get you some of these securities at a cost of $2500 each. Your money is now invested in a bank that pays an 8% nominal (quoted) interest rate but with quarterly compounding. You regard the securities as being just as safe, and as liquid, as your bank deposit, so your required effective annual rate of return on the securities is the same as that on your bank deposit. Should you buy these securities at a cost of $2500 each?
Washington-Pacific invested $5 million to buy a tract of land and plant some young pine
trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at
an expected price of $9 million. What is W-Ps expected rate of return?
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