assume that at the beginning of the year, you purchase an investment for $7,200 that pays $100 annual income. Also assum vestment's value has decreased to $6,800 by the end of the year. a) What is the rate of return for this investment? (Input the amount as a positive value. Enter your answer as a percent rou lecimal places.) Rate of return % b) Is the rate of return a positive or negative number? O Positive O Negative

assume that at the beginning of the year, you purchase an investment for $7,200 that pays $100 annual income. Also assum vestment's value has decreased to $6,800 by the end of the year. a) What is the rate of return for this investment? (Input the amount as a positive value. Enter your answer as a percent rou lecimal places.) Rate of return % b) Is the rate of return a positive or negative number? O Positive O Negative

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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Bha
Consider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. value < X
Suppose you makes a $1,000 initial investment today, a $4,000 additional investment at the end of year one, and another $500 investment at the end of year two. You had returns of 10% in year one, 2% in year two, and -5% in year three. What is the dollar-weighted average return on your investments? Select one: a. -2.59% b. 10.00% c. 0.51% d. -0.73% e. 3.00%
3. If you invest $2000 now, and receive 3 yearly payments of $100 each year plus $2500 in the 3rd year, a. what is the Internal Rate of Return (IRR) b. Interpret your results
An annual percentage rate (APR) is determined by annualizing the rate using compound interest. Select one: True False The more frequent the compounding, the higher the future value, other things equal. Select one: True False Which statement is NOT true? a. Figure A correctly displays the relation between FVs of $1 investment at the interest rates 12.7% and 9.8%. b. Investment of $1 needs more than 7 years to double its value at the rate 9.8%, while only requiring less than 6 yeas to double at 12.7%. c. Figure B correctly displays the relation between PVs of $3 future value at the interest rates 12.7% and 9.8%. d. A discount factor for 5 years at 12.7% is lower than the discount factor for 5 years at 9.8%. After reading the fine print in your credit card agreement, you find that the "low" interest rate is actually an 17.05% APR, or 1.4208% per month. What is the effective annual rate? a. 18.45% b. 19.41% c. 18.82% d. 19.56% A zero-coupon bond is a bond that pay no interest…
Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all work
The present value represents the amount of money you would have to deposit today in order to match what you would get from the income stream at the future date. The formula is Time = M = i Future value represents the total amount of money you would have if you deposit the income stream until a future date. The formula is To start our problem we need to identify the variables. Rate =r= i Income Stream S(t) = i Present Value = years % M 1. 0 S (t) et dt. Future Value = Present Value* erM dollars/year
You're trying to choose between two different investments, both of which have up-front costs of $25,000. Investment G returns $60,000 in six years. Investment H returns $92,000 in nine years. Calculate the rate of return for each these investments. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Investment G Investment H % %
Consider the following investment. (Round your answers to the nearest cent.) $5,600 at 6 3/4% compounded quarterly for 8 1/2 years (a) Find the future value of the given amount.$ (b) Interpret the future value of the given amount. After 8 1/2 years, the investment is worth $ .
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $288,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $36,000. The company's minimum desired rate of return for net present value analysis is 12%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. 8 X %
j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year 1 $100, Year 2 $200, Year 3 $400 Year Payment 1 100 2 200 3 400 Rate 8% To find the PV, use the NPV function: Pv= $581.59 Year Payment x (1+ I)^(N- t) = FV 1 100 2 200 3 400
A real estate investment has the following expected cash flows: Year Cash Flows 1 $14,000 2 19,000 3 19,000 4 25,000 The discount rate is 3 percent. What is the investment’s present value? Round your answer to 2 decimal places

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