**Problem 5-11 Present Values (LO2)**You can buy a property today for $3 million and sell it in 5 years for $4 million. (You earn no rental income on the property.)**a.** If the interest rate is 8%, what is the present value of the sales price? *Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.***b.** Is the property investment attractive to you?**c-1.** What is the present value of the future cash flows if you could also earn $200,000 per year rent on the property? The rent is paid at the end of each year. *Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.***c-2.** Is the property investment attractive to you now?---**Table Explanation:**- **a. Present value** - Calculated present value: $2,722,332.788 (in millions, rounded to 3 decimal places the answer should be $2.722) - Correctness: Incorrect- **b. Is the property investment attractive to you?** - Answer: No - Correctness: Correct- **c-1. Present value** - Calculated present value: $798,542.007 (in millions, rounded to 3 decimal places the answer should be $0.799) - Correctness: Incorrect- **c-2. Is the property investment attractive to you now?** - Answer: Yes - Correctness: Correct**Note:** The user's calculations for present value are incorrect based on the requirement for rounding in millions to three decimal places, indicated by the crosses next to the calculated values.

Information Provided: Interest rate = 8% Purchase price = $3 million Selling price = $4 million

a. If the interest rate is 8%, what is the present value of the sales price? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. c-2. Is the property investment attractive to you now?

a. If the interest rate is 8%, what is the present value of the sales price? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows if you also could earn $200,000 per-year rent on the property? The rent is paid at the end of each year. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. c-2. Is the property investment attractive to you now?

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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Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
3. An investor plans to buy a property. She has two options for loans: (1) Loan balance=10, maturity=10 years, interest rate=1%; (2) Loan balance=20, maturity=10 years, interest rate=2%. The incremental (or marginal) borrowing cost by choosing the option (2), instead of the option (1), is approximately x%. Calculate the value of x.
2. Calculate the present value to purchase a lot of land if $18,000 is put down and $2,000 is paid per quarter for 3 years. Assume that there is 6% interest that is compounded quarterly if the cash price for the land is 825, 000, is it better to pay cash or finance the purchase? According to the Present Value of an Annuity Table, at 1.5% interest for 5 years, the factor is 17.16564 O $52,337,28, it is better to pay $25,000 cash 14.782.64 is better to finance the purchase $27, 565.28 at is better to pay $25,000 cash O822,782.64 it is better to finance the purchase "At (harger Canad
Your answer is incorrect. Sheridan Company is considering investing in an annuity contract that will return $33,500 annually at the end of each year for 15 years. Click here to view the factor table. What amount should Sheridan Company pay for this investment if it earns an 10% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 25.25.) Sheridan Company should pay $ eTextbook and Media Save for Later SUPP Attempts: 2 of 3 used Submit Answer
2.3. Suppose the institution pays 7,5% interest, compounded annually. How long will it take for $10 000 to grow to $100 000? P = Po(1 + i) a. Calculate the value of t? b. Motivate your answer?
Investment X offers to pay you $5,400 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years. If the discount rate is 6 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) If the discount rate is 21 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Give typing answer with explanation and conclusion Compute the future value of $1,000 compounded annually for A-10 years at 5 percent B-10 years at 7 percent C-20 years at 5 percent D why is the interest earned in part c not twice the amount earned in part a?
Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10% c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.
(a) What is the amount of interest at the end of 2 years on $450 principal for a simple interestrate of 10% per year?(b) Find the principle if the interest amount at the end of 2.5 years is $450 for a simple interestrate of 10% per year.(c) An investment of $50,000 is proposed at an interest rate of 8%. What is the future amountin 10 years? Consider both the simple and compound interests.(d) What is the present worth of $1000 for 6 years, if money is compounded 10% annually.(e) How many years will it take for an investment to double itself if the interest rate is 10%?
Calculate the future value of $7,000 in 3 years at an interest rate of 6% per year. (Round to the nearestdollar.) 6 years at an interest rate of 6% per year. (Round to the nearestdollar.) 3 years at an interest rate of 12% per year. (Round to the nearestdollar.) Why is the amount of interest earned in part (1) less than half the amount of interest earned in part (2)?(Round to the nearestdollar.)
4. If you receive $116 each month for 28 years and the discount rate is 0.08, what is the present value? (show the process and can use financial calculator)

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