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If the interest rate is 5 percent what is the present value of a security that pays you 1100 next year and 1210 the year after would you be willing to pay 2310 for this security why or why not?
Wiki User
∙ 14y ago
The NPV of this security is calculated as follows:
(2310) + 1100/1.05 + 1210/1.05^2 = (164.87)
Since the NPV of this investment is negative, you should not buy it.
Wiki User
∙ 14y ago
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