A company can choose one of two investment plans, A and B. Under plan A, it can invest $ 6800 at 7.5% p.a., compounded monthly. Under plan B, it can invest $x at 7.0% p.a., compounded continuously. If the company wants to have the same amount after 5 years using either plan, what is the value of x ? $

A company can choose one of two investment plans, A and B. Under plan A, it can invest $ 6800 at 7.5% p.a., compounded monthly. Under plan B, it can invest $x at 7.0% p.a., compounded continuously. If the company wants to have the same amount after 5 years using either plan, what is the value of x ? $

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 are going to invest $5405 in 3 years and $7923 in 6 years. If you expect to earn a return of 8.26%, how much will you have in 10 years? Answer:
Suppose you have an investment worth $800 and you want it to increase in value by 400%. a) What is the desired future value of the investment? For full marks your answer(s) should be rounded to the nearest dollar. FV = $ 0.00 b) How long will it take the investment to reach the desired future value, if it earns 5.50% compounded semi-annually? Your an be rounded up to the nearest month. Time = 0 years 0 months
A person who invests $1,000 each year finds one choice that is expected to pay 4 percent per year and another choice that may pay 7 percent. What is the difference in return if the investment is made for four years?
A business is planning to purchase a piece of equipment that will produce a continuous stream of income for 8 years with rate of flow f(t) = 9,000. If the continuous income stream earns 6.9%, compounded continuously, what single deposit into an account earning the same interest rate will produce the same future value as the continuous income stream? (This deposit is called the present value of the continuous income stream.) What is the future value of the investment? (Round to the nearest dollar as needed.)
Investment A requires you to pay $30,000 at t = 0 and you will receive $49,000 after five years. Investment B costs $73,000 and provides a cash flow of $128,000 after seven years. What is the rate of return for each of the two investments?
You are offered to spend P500,000 on a certain project that promises to yield yearly benefit of P150,000 for a period of 20 years. If the interest rate is 8%, find if project is desirable using benefit cost analysis
The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?
Assume that you are valuing an infinitely lived asset that pays $350 at the end of each year. What is the present value of the asset if the opportunity cost of funds is 3%?
Suppose that annual income from a rental property is expected to start at $1,250 per year and decrease at a uniform amount of $40 each year after the first year for the 13-year expected life of the property. The investment cost is $7,000, and i is 7% per year. Is this a good investment? Assume that the investment occurs at time zero (now) and that the annual income is first received at EOY one. Click the icon to view the interest and annuity table for discrete compounding when i= 7% per year. The present equivalent of the rental income equals S (Round to the nearest dollar.)
An investment will pay $20,400 at the end of the first year, $30,400 at the end of the second year, and $50,400 at the end of the third year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use the appropriate factor(s) from the tables provided. Required: Determine the present value of this investment using a 9 percent annual interest rate.
An investment promises to pay $4500 every year for 12 years. However, it does not start paying until 3 years from today. If the relevant discount rate is 6%, what is the Present Value?

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