If an investor had purchased the security at market on


Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $100,000 on March 28, 2039, but investors would receive nothing until then. Investors paid RBMCC $24,899 for each of these securities; so they gave up $24,899 on March 28, 2008, for the promise of a $100,000 payment 31 years later. a. Based on the $24,899 price, what rate was RBMCC paying to borrow money? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Rate of return % b. Suppose that, on March 28, 2018, this security’s price is $43,180. If an investor had purchased it for $24,899 at the offering and sold it on this day, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Annual rate of return % c. If an investor had purchased the security at market on March 28, 2018, and held it until it matured, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Annual rate of return %

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Financial Management: If an investor had purchased the security at market on
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