219k views
2 votes
A money market security that has a par value of $10,000 sells for $8,924.70. Given that the security has a maturity of two years, what is the investor's required rate of return?

User Oysio
by
5.0k points

1 Answer

6 votes

Answer:

The answer is "5%".

Step-by-step explanation:


\to \$8,924.70 = (10,000)/((1 + r )^2)\\\\\to \$8,924.70 (1+r)^2= 10,000\\\\\to (1+r)^2= (10,000)/(\$8,924.70)\\\\\to (1+r)^2= (10,000)/(\$8,924.70)\\\\\to (1+r)^2= 1.1204\\\\\to (1+r)= 1.05\\\\\to r= 1.05-1\\\\\to r=0.05\\\\\to r=5\%\\\\

User Vivian
by
5.1k points