You have $5,000 excess cash to invest after you fully funded your emergency fund. You can choose to use the cash on a T-bill that can be purchased for $4,500 (maturing to value at $7,000 after one year) or you can buy two CDs for $2500 each (that can be purchased with a guaranteed 4.5% return after 12 months). Which will give a better return (in percentages)? Show work.
You have $5,000 excess cash to invest after you fully funded your emergency fund. You can choose to use the cash on a T-bill that can be purchased for $4,500 (maturing to value at $7,000 after one year) or you can buy two CDs for $2500 each (that can be purchased with a guaranteed 4.5% return after 12 months). Which will give a better return (in percentages)? Show work.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 27P
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funded your emergency fund. You can choose to use the cash on a T-bill that
can be purchased for $4,500 (maturing to value at $7,000 after one year) or
you can buy two CDs for $2500 each (that can be purchased with a guaranteed
4.5% return after 12 months). Which will give a better return (in percentages)?
Show work.
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