An investment pays you $1000 at the end of each of the next 3 years. Theinvestment will then pay you $2000 at the end of Year 4, $3000 at the end ofYear 5, and $5000 at the end of Year 6. If the interest rate earned on theinvestment is 8 percent, what is its present value? What is its future value?

Interest rate = 8% Calculation of present value Year Cash inflow PVF(8%,Year) Present value A…

Answered: An investment pays you $1000 at the end…

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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An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent. a. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be if the payments occurred forever? (Do not round
An example of how to calculate net present value is done using the following. Imagine you have been given an investment opportunity wherein if you invest $1,200 today, you will receive $650 dollars at the end of each year for the next 5 years. You could separately choose to invest your money at 10% interest each year. Should you take the investment opportunity? To find the answer, use the NPV formula:
You are comparing two annuities. Annuity A pays $115 at the end of each year for 5 years. Annuity B pays $105 at the beginning of each year for 5 years. The rate of return on both annuities is 12 percent. Which one of the following statements is correct given this information? Annuity B has both a higher present value and a higher future value than Annuity A. O Annuity A has both a higher present value and a higher future value than Annuity B. O Annuity A has the same present value and future value as Annuity B.
Wells Fargo offers a new savings product: You make the following payments over the next 5 years and will then receive a lump sum payment 25 years from now. Year Payment 1 300 2 400 3 500 4 600 5 700 The annual interest rate is 7% for the next 5 years, then 2% for the following 20 years. What is the future value of your investment in year 25?
You are offered an investment that requires you to put up $5,000 today in exchange for $12,000 10 years from now. What is the annual rate of return on this investment?
You invest in a project that is expected to pay you $960 every year forever. If the first payment to you occurs 3 years from today and the discount rate is 3.8%, then what is its value today (Round to the nearest dollar).
You are considering investing in a security that will pay you 2,000 in 25 years. If the appropriate discount rate is 9 percent what is the present value of this investment? Assume these investments sell for $1,103 in return for which you receive $2,000 in 25 years. What is the rate of return investors earn on this investment if they buy it for 1, 103 ?
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You have just received a windfall from an investment you made in a friend's business. He will be paying you $17,752 at the end of this year, $35,504 at the end of the following year, and $53,256 at the end of the year after that (three years from today). The interest rate is 11.7% per year. a. What is the present value of b. What is the future value of your windfall in three years (on the date of the last payment)? your windfall? a. What is the present value of your windfall? The present value of your windfall is $ (Round to the nearest dollar.) b. What is the future value of your windfall in three years (on the date of the last payment)? The future value of your windfall in three years is $ (Round to the nearest dollar.)
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