17. Calculating Present Values Suppose you are still committed to owning a $175,000 Ferrari (see Question 9). If you believe your mutual fund can achieve an annual return of 11.2 percent, and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?

17. Calculating Present Values Suppose you are still committed to owning a $175,000 Ferrari (see Question 9). If you believe your mutual fund can achieve an annual return of 11.2 percent, and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?

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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of return will you earn over the last 10 years?
17. Calculating Present Values Suppose you are still committed to owning
a $175,000 Ferrari (see Question 9). If you believe your mutual fund can
achieve an annual return of 11.2 percent, and you want to buy the car in 10
years on the day you turn 30, how much must you invest today?
LO 2

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18. Calculating Future Values You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn an annual rate of return of 10.2 percent and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing? (Does this suggest an investment strategy?) LO 1
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You want to save for retirement. Assuming you are now 20 years old and you want to retire at age 60, you have 40 years to watch your investment grow. You decide to invest in the stock market, which has earned about 8% per year over the past 80 years and is expected to continue at this rate. You decide to invest $2,000 today.
(Related to Checkpoint 5.6) (Solving for) You are considering investing in a security that will pay you $4,000 in 31 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $2,062 in return for which you receive $4,000 in 31 years. What is the rate of return investors earn on this investment if they buy it for $2,062? C a. If the appropriate discount rate is 10 percent, the present value of this investment is $. (Round to the nearest cent.)
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Y8
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