a) Consider an investment which, for an initial charge of £10,000, returns £10,700 after three years. What is the internal rate of return of this investment? Enter your answer as a percentage to three significant figures. Do not enter the % sign. For example, if your answer is 1.23%, then enter 1.23. b) Suppose that an investment has internal rate of return 1.05% and that the current interest rate compounded annually is 1.1% Is the investment worth making?

a) Consider an investment which, for an initial charge of £10,000, returns £10,700 after three years. What is the internal rate of return of this investment? Enter your answer as a percentage to three significant figures. Do not enter the % sign. For example, if your answer is 1.23%, then enter 1.23. b) Suppose that an investment has internal rate of return 1.05% and that the current interest rate compounded annually is 1.1% Is the investment worth making?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 4.1
M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 8.45% with bond interest payable semiannually. Six years ago, $1,478 was paid for the bond. At least a 12% return (yield) on the investment is desired. The minimum selling price must be: Enter your answer as follow: 1234.56
If you had $ 1,000 now and invested it at 7% interest compounded annually, how much would it be worth in eight years ( Figure 2.8)?
The formula for the is curve can be derived from the formula Y = [CO+MPC(Y-T)]+1+G. When the IS curve is derived, I and G are assumed constant and Y varies based on the interest rate r. Assuming that CO=50B, MPC = 80, T=200B, I = 120B-10B (r), and G = 250B, the derived IS curve is (A),Y=1,300B - 50B (r) B ) Y=1, 400B +40B (r) C) Y=1, 300B +50B (r) D) Y=1, 400B - 50B (r) Using the IS formula you calculated in the problem above, what is the value of Y if r = 10(10%) ? A) 1,000B B) 900B C) 800B D) 700B Using the IS formula that you derived above, what is the value of Y ifr = 12 (12%) ? A) 1,000B B) 900B C) 800B D) 700B Assume that the ,M,d money demand function is (=Y-50r, where is the interest rate. The money supply M is 2,000B and the price level P is 4. Use this information to derive the LM curve function/formula. The LM function/formula is A ) Y=650B + 50B (r) B) Y = 650B +40B (r) C) Y = 500B-60B (r) D) Y = 500B + 50B (r) D) 50. ၁ The formula for the IS curve can be derived from the…
John is a very cost-conscious investor. His rule of thumb is that it costs $300 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $300 each year over the life of the car. John is now considering the purchase of a six-year old car with 40,000 miles on it for $7,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for seven years? John's interest rate is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 4% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.)
Three months ago, Jim purchased $11,000 of U.S. Treasury bonds. These bonds have a 30-year maturity period, and they pay dividends every three months at an APR of 17%. However, today's interest rates for similar securities have risen to a (17+1)%APR (compounded quarterly). In view of the interest-rate increase to (17+1)%, what is the current value of Jim's bonds today?
John is a very cost-conscious investor. His rule of thumb is that it costs $300 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $300 each year over the life of the car. John is now considering the purchase of a five-year old car with 40,000 miles on it for $6,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for seven years? John's interest rate is 7% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 7% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.) C
A bank agrees a repurchase agreement (Repo) with its prime broker using £30 million of Mortgage Backed Securities as collateral for a period of 50 days. The prime broker levies a haircut of 10 per cent and charges an annual Repo rate of 4.5 per cent. What is the price at which the bank will repurchase the £30 million MBS at the end of 50 days when the Repo rate interest applies only on the sum of money being lent by the prime broker ? Use a 360 day-count.
A sum of P 1000 is invested now and left for 10 years, at which time the principal is withdrawn. The interest that has accrued is left for another 10 years. If the effective annual interest rate is 5%, what will be the withdrawal at the end of the 20th year? P 1402.40 P 1240.40 P 1024.40 P 1204.40
Indicate whether the given statements is true (T) or false (F): "Suppose that a lump sum of $1,000 is invested at r = 10% for eight years. The future equivalent is greater for daily compounding than it is for continuous compounding".
John is a very cost-conscious investor. His rule of thumb is that it costs $200 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $200 each year over the life of the car. John is now considering the purchase of a four-year old car with 40,000 miles on it for $7,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for eight years? John's interest rate is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.)
Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of year 1? Select the closest answer.