Now that you’ve thought about the decision rule that should be applied to your decision, apply it to the following security offered by your broker:
Jing Associates, LLC, a large law firm in Denver, is building a new office complex. To pay for the construction, Jing Associates is selling a security that will pay the investor the lump sum of $38,600 in nine years. The current market price of the security is $16,429.
Assuming that you can earn an annual return of 8.25% on your next most attractive investment, how much is the security worth to you today?
$18,912
$19,858
$31,205