You Are Offered a Chance to Buy an Asset for $7,250

question 108

Multiple Choice

You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4.What rate of return would you earn if you bought this asset?

• A) 4.93%
• B) 5.19%
• C) 5.46%
• D) 5.75%
• E) 6.05%

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Definitions:

SEC

Stands for the Securities and Exchange Commission, a U.S. federal agency responsible for regulating the securities industry and ensuring fair and efficient markets.

Waiting Period

In securities registration, the period between the time an issuer files a registration statement and prospectus with the SEC requesting to offer a security and the time the offer is approved by the SEC, which is a minimum of 20 days.

Registration Statement

A legal document filed with regulatory authorities providing essential details about an investment offering to the public, ensuring transparency and compliance with securities laws.

Prospectus

A legal document issued by companies that are offering securities for sale, providing potential investors with details about the investment.