1. In 1626 Peter Minuit purchased Manhattan Island from the Native Americans for about $24 worth of trinkets. If the tribe had taken cash instead and invested it to earn 8% per year compounded annually, how much would the Indians have had in 1986, 360 years later? 8. You win a $1 million lottery, which pays you $50,000 per year for 20 years. How much is your prize really worth, assuming an interest rate of 8% per year? 9. Your great-aunt left you $20,000 when she died. You can invest the money to earn 12% per year. If you spend $3,540 per year out of this inheritance, how long will the money last?

1. In 1626 Peter Minuit purchased Manhattan Island from the Native Americans for about $24 worth of trinkets. If the tribe had taken cash instead and invested it to earn 8% per year compounded annually, how much would the Indians have had in 1986, 360 years later? 8. You win a $1 million lottery, which pays you $50,000 per year for 20 years. How much is your prize really worth, assuming an interest rate of 8% per year? 9. Your great-aunt left you $20,000 when she died. You can invest the money to earn 12% per year. If you spend $3,540 per year out of this inheritance, how long will the money last?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You won a lottery of $1,000,000. Office offered two options: the first one you can take it today a $500,000 today (after tax), or the second option: $50,000 per year for the rest of your life (you are 20 and expected to live a long time, like 200…) if the interest rate is 10%. What is the value of the second option today?
Mark wants to invest $10,000. In a CD for at least 10 years. The first choice is a CD that pays 4% annually and uses simple interest. What is the total value after 10 years? a) $14,000 Ob) $6,000 c) $10,000 O d) $400
You just won the lottery! As your prize, you will receive $1,200 a month for 2 years. If you can earn 6 percent on your money, what is this prize worth to you today? a 13942.72 b 27075.44 c 2382.12 d 2364.47
Hi, I'm looking for help with solving the answer for the following question. I've tried it myself several times, and I keep getting my answers marked as incorrect. If $15,000 is invested at 3.5% for 20 years, find the future value if the interest is compounded for every minute (n= 525,600).
2. Suppose that you are considering speculating on some vacant land located on Bali Hai, an island in the South Pacific. You could acquire the land today for $850,000. You plan on holding it for fifteen years and then selling it. Annual taxes, insurance and upkeep (mowing, clearing of debris, etc.) of the land will be $35,000, paid at the end of the first year. These costs will increase annually at a 2.5% rate until you sell the land at the end of the fifteenth year. If you require an annual rate of return of 20%, what is the minimum amount that you have to net (after commissions, transfer taxes, fees, etc.) on the sale of this land at the end of the final year to earn your required rate of return? (Ignore income taxes)
You are selling your house. The Smiths have offered you $200,000. They will pay youimmediately. The Joneses have offered you $275,000, but they can not pay you until three yearsfrom today. The interest rate is 12 percent. Which offer should you choose?
You just won a lottery that promises to pay you $1 million exactly 10 years from today. Because the $1 million payment is guaranteed by the state in which you live, opportunities exist to sell the claim today for an immediate lump-sum cash payment. What is the least you will sell your claim for if you could earn 5.05 % on similar-risk investments during the 10-year period?
Your parents are saving to buy a new boat, at the price of $78,000. They have saved $46,840 which is invested at 4.9 percent annual interest. How many years will it be before they purchase the boat, assuming the price of the boat remains constant? 9.67 years O 17.18 years 10.66 years O 12.81 years O 16.91 years
You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity? $50,753 $59,195 $53,424 $62,311 $56,236
If you purchase a car from a certain dealership, you expect to have four free oil changes per year during the five years you keep the car. Each oil change would normally cost you $24.96. If you save your money in a mutual fund earning4.78% per quarter, how much are the oil changes worth to you at the time you buy the car?" A. 457.13 B. 253.98 C. 631.35 D. 796.42 E. 440.74
Franco wants to accumulate P150,000 in order to make the down payment for a new car. He plans to invest P25,000 every start of the year, how long would it take him to have enough money to make the down payment if the interest rate is 8%? Use two decimal points.
am. 234.

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