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    Annual payment of the security investment.

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    You are considering an investment in a 40-year security. The security will pay $25 a year at the end of each of the first three years. The security will then pay $30 a year at the end of each of the next 20 years. The nominal interest rate is assumed to be 8 percent, and the current price (present value) of the security is $360.39. Given this information, what is the equal annual payment to be received from Year 24 through Year 40 (i.e., for 17 years)?

    a. $35
    b. $38
    c. $40
    d. $45
    e. $50

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    Solution Preview

    First, you need to find the present value at the nominal interest rate of 8% of the $25 paid for the first three years.

    $25 x ...

    Solution Summary

    This solution is comprised of a detailed calculation to find the annual payment of the security investment.