You Are Considering Investing in a Security That Will Pay

question 91

Multiple Choice

You are considering investing in a security that will pay you $80 in interest-only at the end of each of the next 10 years.If this security is currently selling for $588.81,then the IRR for investing in this security is closest to:

• A)6.0%.
• B)7.0%.
• C)6.5%.
• D)5.0%.

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Definitions:

Industry

A group of companies that are related based on their primary business activities.

Variable Costs

Costs that change in proportion to the level of goods or services that a business produces.

Profit-maximizing Output

The level of production at which a firm achieves the highest profit, where marginal revenue equals marginal cost.

Marginal Cost

The expenditure required to produce an extra unit of a good or service.