A real estate investor holds a time-payment investment contract on his shares in a piece of land. The contract calls for the payment of $1,400 at the end of each month for a six-year period. The first payment is due in one month. The investor offers to sell you the contract for $68,000 cash today. If you can otherwise make 1% per month on your money, would you accept or reject the investor's offer? Select one: a. No, you will pay $112.6 extra per month b. Yes, you will pay $556.22 less per month O c. No, you will pay $85.37 more per month d. Yes, you will pay $70.58 less per month e. Can not take a decision

A real estate investor holds a time-payment investment contract on his shares in a piece of land. The contract calls for the payment of $1,400 at the end of each month for a six-year period. The first payment is due in one month. The investor offers to sell you the contract for $68,000 cash today. If you can otherwise make 1% per month on your money, would you accept or reject the investor's offer? Select one: a. No, you will pay $112.6 extra per month b. Yes, you will pay $556.22 less per month O c. No, you will pay $85.37 more per month d. Yes, you will pay $70.58 less per month e. Can not take a decision

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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Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $5,280 at the end of each of the next 3 years. The opportunity requires an initial investment of $1,320 plus an additional investment at the end of the second year of $6,600. What is the NPV of this opportunity if the interest rate is 2% per year? Should Marian take it? What is the NPV of this opportunity if the interest rate is 2% per year? The NPV of this opportunity is $ (Round to the nearest cent.) .
Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment costs $1,000 today and provides a payoff, also described below, one year from now. Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 3 50% chance of receiving $200 50% chance of receiving $2,000 If Erik is risk averse, which investment will he prefer? The investor will choose option 1. The investor will choose option 2. The investor will choose option 3. The investor will be indifferent toward these options. In contrast to his brother Erik, Devin is a risk lover (or exhibits risk seeking behavior). Which of the following statements is true about Devin? Everything else remaining constant, Devin will prefer option 3. Everything else remaining constant, Devin will prefer option 2. Everything else remaining constant,…
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Suppose an Investor, Erik, is offered the Investment opportunities described in the table below. Each Investment costs $1,000 today and provides a payoff, also described below, one year from now. Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 3 50% chance of receiving $200 50% chance of receiving $2,000 If Erik is a risk neutral investor, which investment will he prefer? O Erik will be indifferent toward these options. Erik will choose option 1. Erik will choose option 2. Erik will choose option 3. In contrast, Erik's brother, Devin, is risk averse. Which of the following statements is true about Devin? Everything else remaining constant, Devin will prefer option 1. Everything else remaining constant, Devin will prefer option 2. ○ Everything else remaining constant, Devin will prefer option 3. O None of these options is preferred.

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