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Comparing the pv of the note with current bank account

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Suppose someone offered to sell you a note calling for the payment of $1,000 in 15 month. They offer to sell it to you for $850.00. You have $850.00 in a bank time deposit that pays a 6.76649% nominal rate with daily compounding, which is a 7% effective annual interest rate, and you plan to leave the money in the bank unless you buy the note. Check the decision in three ways:

Question (1) By comparing your future value if you buy the note versus leaving your money in the bank;

Question (2) by comparing the PV of the note with your current bank account; and

Question (3) by comparing the EFF% on the note with that of the bank account.

Reference no: EM132554471

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