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Royce receives a $10,000 savings bond from his grandmother that matures in 8 years when Royce turns 25. Royce's older brother, Ben, offers Royce $11,000
Royce receives a $10,000 savings bond from his grandmother that matures in 8 years when Royce turns 25. Royce's older brother, Ben, offers Royce $11,000 to purchase the savings bond today, but Royce declines the offer. Assuming Royce made the correct choice in refusing Ben's offer, what do you know about Royce's annual required return (r) over the next 8 years?
a) r = 0%
b) r < 0%
c) r = 10%
d) r > 0%
Please explain your answer.
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