return of 15% has the choice of receiving one of the following: (6 points) 10 annual payments of 1500 to begin at the end of the year 10 annual payments of 1125 beginning immediately Which option has the highest PV and approximately how much greater is it compared with the other option

return of 15% has the choice of receiving one of the following: (6 points) 10 annual payments of 1500 to begin at the end of the year 10 annual payments of 1125 beginning immediately Which option has the highest PV and approximately how much greater is it compared with the other option

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 2P

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

An Investor who requires an annual return of 15% has the choice of receiving one of the following: (6 points)

10 annual payments of 1500 to begin at the end of the year

10 annual payments of 1125 beginning immediately

Which option has the highest PV and approximately how much greater is it compared with the other option?

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