An investor has accumulated $4,450 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 9%. A one-year bank certificate of deposit will pay 11%, but the minimum investment is $7,450. Required: a. Calculate the amount of return the investor would earn if the $4,450 were invested for one year at 9%. b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 19%, and then $7,450 were invested for one year at 11%. c. Calculate the net rate of return on the investment of $4,450 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
An investor has accumulated $4,450 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 9%. A one-year bank certificate of deposit will pay 11%, but the minimum investment is $7,450. Required: a. Calculate the amount of return the investor would earn if the $4,450 were invested for one year at 9%. b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 19%, and then $7,450 were invested for one year at 11%. c. Calculate the net rate of return on the investment of $4,450 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.
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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Transcribed Image Text:An investor has accumulated $4,450 and is looking for the best rate of
return that can be earned over the next year. A bank savings account
will pay 9%. A one-year bank certificate of deposit will pay 11%, but the
minimum investment is $7,450.
Required:
a. Calculate the amount of return the investor would earn if the $4,450
were invested for one year at 9%.
b. Calculate the net amount of return the investor would earn if $3,000
were borrowed at a cost of 19%, and then $7,450 were invested for
one year at 11%.
c. Calculate the net rate of return on the investment of $4,450 if the
investor accepts the strategy of part b.
Note: Round your answer to 2 decimal places.
a. Amount of return
b. Net amount of return
c. Net rate of return
%
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