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PV and Effective Annual Yield

Your grandmother has asked you to evaluate two alternative investments for her. The first is a security that pays $40 at the end of each of the next 3 years, with a final payment of $1,040 at the end of Year 4. This security costs $920. The second investment involves simply putting the same amount of money in a bank savings account that pays a 7% nominal (quoted) interest rate, but with quarterly compounding. Your grandmother regards the two investments as being equally safe and liquid, so the required effective annual rate of return on the security is the same as that on the bank deposit. She has asked you to calculate the value of the security to help her decide whether it is a good investment. What is its value relative to the bank deposit? Do not round intermediate calculations. Round your answer to the nearest cent.

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