22. Your cousin has asked for your advice on whether or not to buy a bond for $995, which will make one payment of $1,200 five years from today, or invest in a local bank account. a. What is the internal rate of return on the bond's cash flows? What additional information do you need to make a choice? b. What advice would you give her if you learned the bank is paying 3.5% per year for five years (compounded annually)? c. How would your advice change if the bank were paying 5% annually for five years? If the price of the bond were $900 and the bank pays 5% annally?

22. Your cousin has asked for your advice on whether or not to buy a bond for $995, which will make one payment of $1,200 five years from today, or invest in a local bank account. a. What is the internal rate of return on the bond's cash flows? What additional information do you need to make a choice? b. What advice would you give her if you learned the bank is paying 3.5% per year for five years (compounded annually)? c. How would your advice change if the bank were paying 5% annually for five years? If the price of the bond were $900 and the bank pays 5% annally?

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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Similar questions

How much would your investment be worth if you deposited $5,555.55 into a bank that paid simple interest of 4% for 10 years?
E1
Find the interest rates earned on each of the following. Round your answers to the nearest whole number. a. You borrow $660 and promise to pay back $759 at the end of 1 year. % b. You lend $660 and the borrower promises to pay you $759 at the end of 1 year. % c. You borrow $69,000 and promise to pay back $109,495 at the end of 6 years. % d. You borrow $11,000 and promise to make payments of $3,359.50 at the end of each year for 5 years. %
If you deposit $20,000 in a bank account that pays 5% interest annually, how much will be in your account after 5 years? A. $15,670.52 B. $18,525.63 C. $25,670.52 D. $15,525,63 E. $25,525.63
Please do both correctly, I'll rate the answer Question: (i) A $10,000 bond is purchased for $9600 and has a bond rate of 6% per year payable semiannually for 2 years. What is the interest rate? (ii) You borrow 35,000 for 10 years at 10% per year compounded monthly. After making 24 payments you decide to pay the loan off. What's that payoff amount?
suppose you want to buy a new car that costs you 11993 OMR by a loan from bank Muscat for 6 years. the bank charges you 4.004 percent on your loan. what is the annual payment should you pay to the bank every year on your loan? Select one: a. 2827.57 b. 62860.71 c. None of the options d. 2288.11 e. 1921.51
An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
Mf4.
← You have just negotiated a home mortgage with a principal of $350,000. The bank's quoted rate is 6.3%. You chose a 20-year amortization and you decide to make 12 payments per year. Each mortgage payment is $2,551.90. How much interest do you pay in the first year? Express your answer as a percentage of the total value of your mortgage payments in the first year. The interest as a percentage of the total payments in year 1 is %. (Round to four decimal places as needed.)
24) One of the local banks indicates that it computes the interest it pays on savings accounts by the continuous compounding method. Suppose you deposited $100 in the bank and they pay 4% per annum, compounded continuously. After 5 years, how much money will there be in the account? Select one: a. $ 122.14 b. $ 144.14 c. $ 322.14 d. $ 222.14 25) At 10% per year simple interest, how long will it take for a deposit of $1000 now to accumulate to $100,000? Select one: a. n=99 years b. n=50 years c. n=44 years d. n= 990 years 26) When only one alternative can be selected from two or more, the alternatives are said to be: Select one: a. subjective alternatives b. independent alternatives c. revenue alternatives d. mutually exclusive
[4] Directions: Identify if the problem involves simple interest or compound interest. Then, solve the problem. Show complete solution. Your sister deposited P400.00 into savings account. How much interest will she receive at the end of one year if the interest rate is 3%?
5. You take $100 to your local savings bank to invest for five years. You are given the choice of two investments by the banker Notifications Time Left 00:00:28 ? Guide Me 1. You can Invest in a regular savings account that pays you 14.00% interest each year with interest compounded annually. That is each year the interest you can gets deposited in your bank account and earns interest until the end of the five years. it. You can invest in a special account that pays you 20.00% interest each year, the catch is that the interest does not compound, Rattier each year the interest payrrient is put into a special account which collects no further interest and cannot be reinvested anywhere until the end of the five years Which option should you select and why? a, Select Option i: It earns $44.63 more than Optianill b. Both Options earn you the same amount of money so you are indifferent between the two c. Select Option it It earns $7.46 more than Option d. Select Option it It earns $30.00…

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