a) You are considering investing $4,500 at an interest rate of 8.5% compounded annually for five years or investing the $4,500 at 9% per year simple interest for five years. Which option is better? b) You are considering investing $1,000 at an interest rate of 6.5% compounded annually for five years or investing the $1,000 at 6.8% per year simple interest for five years. Which option is better? You are about to borrow $15,000 from a bank at an interest rate of 8% compounded annually. You are required to make three equal annual repayments in the amount of $5,820.50 per year, with the first repayment occurring at the end of year. Show the interest payment and principal payment in each year. Suppose you have the alternative of receiving either $36,000 at the end of nine years or P dollars today. Currently, you have no need for money, so could deposit the P dollars in a bank that pays 4% interest. What value of P would make you indifferent in your choice between P dollars today and the promise of $36,000 at the end of nine years?
a) You are considering investing $4,500 at an interest rate of 8.5% compounded annually for five years or investing the $4,500 at 9% per year simple interest for five years. Which option is better? b) You are considering investing $1,000 at an interest rate of 6.5% compounded annually for five years or investing the $1,000 at 6.8% per year simple interest for five years. Which option is better? You are about to borrow $15,000 from a bank at an interest rate of 8% compounded annually. You are required to make three equal annual repayments in the amount of $5,820.50 per year, with the first repayment occurring at the end of year. Show the interest payment and principal payment in each year. Suppose you have the alternative of receiving either $36,000 at the end of nine years or P dollars today. Currently, you have no need for money, so could deposit the P dollars in a bank that pays 4% interest. What value of P would make you indifferent in your choice between P dollars today and the promise of $36,000 at the end of nine years?
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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- a) You are considering investing $4,500 at an interest rate of 8.5% compounded annually for five years or investing the $4,500 at 9% per year simple interest for five years. Which option is better?
- b) You are considering investing $1,000 at an interest rate of 6.5% compounded annually for five years or investing the $1,000 at 6.8% per year simple interest for five years. Which option is better?
- You are about to borrow $15,000 from a bank at an interest rate of 8% compounded annually. You are required to make three equal annual repayments in the amount of $5,820.50 per year, with the first repayment occurring at the end of year. Show the interest payment and principal payment in each year.
- Suppose you have the alternative of receiving either $36,000 at the end of nine years or P dollars today. Currently, you have no need for money, so could deposit the P dollars in a bank that pays 4% interest. What value of P would make you indifferent in your choice between P dollars today and the promise of $36,000 at the end of nine years?
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