Effective annual rate of return on your investment change

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You have some money on deposit in a bank account which pays a nominal APR (or quoted) rate of 8.0944 percent, but with interest compounded daily (using a 365 day year). Your friend owns a security which calls for the payment of $10,000 after 27 months. Your friend's security is just as safe as your bank deposit, and your friend offers to sell it to you for $8,000 today. If you buy the security, by how much will the effective annual rate of return on your investment change from what you were earning in the bank?

Reference no: EM132028611

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