What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for year 2014?
A) 7.50%
B) 10.00%
C) 8.00%
D) 7.20%
E) None of these

Question

Quizplus · Accepted Answer

The correct answer is A because the city of Mitchell would have to pay an interest rate of 7.50% in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for year 2014.

What Interest Rate Would the City of Mitchell Have to Pay