1. Zaggy Zargawhoop has an idea for a new business. In order to develop his idea, he needs toinvest $600 today. Zaggy's idea will pay off $690 next year for certain.Suppose that Zaggy has no savings to fund his idea and has to borrow money from the bank.a. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy borrowmoney from the bank to fund his idea?b. Suppose that the interest rate for borrowing and for lending is 22%. Should Zaggy borrowmoney from the bank to fund his idea?Now suppose that Zaggy has $600 in his bank account.c. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy withdrawhis savings to fund his idea?d. Suppose that the interesthis savings to fund his idea?e. Does the method of financing (whether through savings or debt) appear to affect therelationship between the interest rate and the decision to undertake investment? Explain.for borrowing and for lending is 22%. Should Zaggy withdraw

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1. Zaggy Zargawhoop has an idea for a new business. In order to develop his idea, he needs to invest $600 today. Zaggy's idea will pay off $690 next year for certain. Suppose that Zaggy has no savings to fund his idea and has to borrow money from the bank. a. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy borrow money from the bank to fund his idea? b. Suppose that the interest rate for borrowing and for lending is 22%. Should Zaggy borrow money from the bank to fund his idea? Now that Zaggy has $600 in his bank account. suppose c. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy withdraw his savings to fund his idea? d. Suppose that the interest rate for borrowing and for lending is 22%. Should Zaggy withdraw

1. Zaggy Zargawhoop has an idea for a new business. In order to develop his idea, he needs to invest $600 today. Zaggy's idea will pay off $690 next year for certain. Suppose that Zaggy has no savings to fund his idea and has to borrow money from the bank. a. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy borrow money from the bank to fund his idea? b. Suppose that the interest rate for borrowing and for lending is 22%. Should Zaggy borrow money from the bank to fund his idea? Now that Zaggy has $600 in his bank account. suppose c. Suppose that the interest rate for borrowing and for lending is 12%. Should Zaggy withdraw his savings to fund his idea? d. Suppose that the interest rate for borrowing and for lending is 22%. Should Zaggy withdraw

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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Mf4.
Time to accumulate a given sum Personal Finance Problem Manuel Rios wishes to determine how long it will take an initial deposit of $7,000 to double. a. If Manuel earns 8% annual interest on the deposit, how long will it take for him to double his money? b. How long will it take if he earns only 5% annual interest? c. How long will it take if he can earn 10% annual interest? d. Reviewing your findings in parts a, b, and c, indicate what relationship exists between the interest rate and the amount of time it will take Manuel to double his money. a. If Manuel earns 8% annual interest, the amount of time to double his money is years. (Round to two decimal places.) C
W3.Part 2 – You have $10,000 to invest. Your Grandmother, who doesn’t trust banks, has advised you to put the money under your mattress to save for the future. Conversely, your Mother suggests you open a savings account at a bank. In your town, the banks are currently offering 3% interest. One bank (Bank A) compounds the interests each quarter (March 31, June 30, September 30, and December 31). The other bank (Bank B) compounds the interest on an annual basis (December 31). Assuming you would save your money for the next 10 years, what would your balance be in Bank A and in Bank B? Please describe your calculations within your response.
4. You are thinking of buying house for $70,000. The house will be worth $100,000 in five years. A. Should you buy the lot if r = 0.05? (r= interest rate a bank would pay you) B. Should you buy it if r = 0.10? (r= interest rate a bank would pay you)
2. Suppose you bought a condo for $200,000 financing it with a $40,000 down payment of your own funds and a $160,000 mortgage loan from a bank. D.you only put down $20,000 and borrowed $230,000 to buy the $250,000 house. Assuming that the market value of your house has fallen to $210,000 and ignoring interest and other costs, calculate your rate of return on your asset (ROA) and your rate of return on equity (ROE).
Shashin has 4P dollars that he wants to invest in a savings account earning an interest rate of r at the end of every two weeks. Nimish suggests an alternative: that Shashin instead open four different savings accounts with the bank (all earning the same rate, r at the end of every two weeks), and invest P dollars into each of them. This way Shashin can take advantage of the great interest rate even more! Help Shashin determine which strategy to adopt.
You have two 8-years old twin children, and you anticipate that when they will turn 18 (exactly 10 years from now) they will need $500,000 to cover living and tuition college expenses. Suppose that the discount rate is 10%. 1. If you want to meet this negative cash flow only with current savings, how much would you need to set aside right now? 2. Suppose, instead, that want to meet this negative cash flow only saving a constant amount at the end of each year, for the next 10 years. What is the amount you should set aside each year?
Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to loan you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%.What is your monthly payment to her, and how much interest will you pay her over the year (9 months)?(Fill in the blanks below and give your answers as whole numbers.)The amount of interest per month you would pay Aunt Sally is $__(1)__ .The total interest you will pay her over the year (9 months)is $__(2)__ .
am. 234.

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