11 Fun with IRR. Suppose you have just graduated from college and are deciding on a career. Your four career options, along with your salary in each of the four earning periods, are displayed in Table 5.3. Assume that any career will only last four periods before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Осcupation Period 0 Period 1 Period 2 Period 3 Ophthalmologist -5 1 10 12 Accountant 4 Starving artist 1 1 1 1 Sports superstar 15 0. Assume your discount factor 8 =0.95. Interpret this assumption. a b Find the value of the interest rate r that corresponds to your discount factor. c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal- mologist and of becoming an accountant. Which career do you prefer?

11 Fun with IRR. Suppose you have just graduated from college and are deciding on a career. Your four career options, along with your salary in each of the four earning periods, are displayed in Table 5.3. Assume that any career will only last four periods before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Осcupation Period 0 Period 1 Period 2 Period 3 Ophthalmologist -5 1 10 12 Accountant 4 Starving artist 1 1 1 1 Sports superstar 15 0. Assume your discount factor 8 =0.95. Interpret this assumption. a b Find the value of the interest rate r that corresponds to your discount factor. c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal- mologist and of becoming an accountant. Which career do you prefer?

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

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