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Pay your friend to switch the securities

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Reference no: EM133239432

Question

Suppose that you own a security that is going to pay $700 next year, $1,050 the following year, and $2,100 the year after that. Your friend owns a security that will pay $600 for the next 10 years. If investors can earn a rate of 6.14% in this market, what is the maximum amount that you should be willing to pay your friend to switch the securities (i.e., you will take your friend's security, and your friend takes your security).

Reference no: EM133239432

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