An Investment Promises Two Payments of $500 on Dates 3

question 74

Essay

An investment promises two payments of $500 on dates 3 and 6 months from today. If the required return on investment is 9%:
a) What is the value of the investment today?
b) What will its value be in 1 month if the required rate of return remains at 9%?
c) Give an explanation for the change in value as time passes.

---

Definitions:

Groupthink

A psychological phenomenon that occurs within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Weapons of Mass Destruction

Weapons capable of causing widespread death and destruction, typically nuclear, chemical, or biological weapons.

Bystander Apathy

The phenomenon in which people are less likely to offer help to a victim when other people are present.

Diffusion of Responsibility

A sociopsychological phenomenon whereby a person is less likely to take responsibility for action or inaction when others are present, often leading to a lack of action in group situations.