B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.2 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.05 0.50 0.40 0.05 -5 3 7 8 % % % %
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![B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.2 percent. Calculate the investment's expected return and its standard
deviation. Should Gautney invest in this security?
Probability Return
a.
0.05
0.50
0.40
0.05
-5
3
7
8
%
%
%
%
The investment's expected return is ___%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F054c23fd-cb6d-45a2-8075-96d75d134917%2Ffcefce81-48c5-43a4-838e-1e064309ff16%2Fue39rva_processed.jpeg&w=3840&q=75)
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- (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.10 −6 % 0.35 4 % 0.45 5 % 0.10 10 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.)Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.0 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.20 −7 % 0.30 1 % 0.30 3 % 0.20 7 %(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -6% 3% 7% 9% Probability 0.05 0.35 0.55 0.05 (Click on the icon in order to copy its contents into a spreadsheet.) a. The investment's expected return is ... %. (Round to two decimal places.)
- (Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security One-year Treasury bills are currently paying 3.1 percent. Calculate the investment's expected return and its standard deviation Should Gautney invest in this security? Probability 0.10 0.50 Return -6% 1% 5% 9% 0.30 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) CID a. The investment's expected return is%. (Round to two decimal places)We have purchased a security with the following payment schedule: Year 1 2 3 Payment $100 S150 S400 If the present value of this investment is $580.59, what is the rate of return (or interest rate) ?Answer the following questions:a. Assuming a rate of 10% annually, find the FV of $1,000 after 5 years.b. What is the investment’s FV at rates of 0%, 5%, and 20% after 0, 1, 2, 3, 4, and 5 years?c. Find the PV of $1,000 due in 5 years if the discount rate is 10%.d. What is the rate of return on a security that costs $1,000 and returns $2,000 after 5 years?e. Suppose California’s population is 36.5 million people and its population is expectedto grow by 2% annually. How long will it take for the population to double?f. Find the PV of an ordinary annuity that pays $1,000 each of the next 5 years if theinterestrate is 15%. What is the annuity’s FV?g. How will the PV and FV of the annuity in part f change if it is an annuity due?h. What will the FV and the PV be for $1,000 due in 5 years if the interest rate is 10%,semiannual compounding? i. What will the annual payments be for an ordinary annuity for 10 years with a PV of$1,000 if the interest rate is 8%? What will the payments be if this…
- Find the PV and FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year Payment 1 100 2 200 3 400 Rate = 8% To find the PV, use the NPV function: PV = Year Payment x (1 + I )^(N-t) = FV1 100 1.17 116.64 2 200 1.08 216.00 3 400 1.00 400.00 Sum = ?PV = ?FV of PV = ?Suppose the term structure of risk-free interest rates is as shown below: 5 yr 7 yr 10 yr 20 yr Term 1 уг 2 yr 3 yr 3.24 3.79 4.09 5.05 2.07 2.46 2.71 Rate (EAR %) a. Calculate the present value of an investment that pays $1,000 in two years and $3,000 in five years for certain. b. Calculate the present value of receiving $100 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average rate in year 3 and year 5.) c. Calculate the present value of receiving $1,800 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.)Suppose the term structure of risk-free interest rates is as shown below: 5 yr 7 yr 10 yr 20 yr Term 1 yr 2 yr 3 yr 2.42 2.77 3.31 3.75 4.15 4.93 1.98 Rate (EAR %) What is the present value of an investment that pays $103 at the end of each of years 1, 2, and 3? If you wanted to value this investment correctly using the annuity formula, what discount rate should you use? What is the present value of an investment that pays $103 at the end of each of years 1, 2, and 3? The present value of the investment is $294.08. (Round to the nearest cent.) If you wanted to value this investment correctly using the annuity formula, what discount rate should you use? The discount rate you should use if you want to use the annuity formula is 2.94%. (Round to two decimal places.)
- Wells Inc., has identified an investment project with the following cash flows. Year Cash flow 1 $970 2 $1200 3 $1420 4 $2160 a.) If the discount rate is 7 percent, what is the future value of these cash flows in year 4? a.) Future value at 7 percent_____ b.) What is the future value at an interest rate of 13 percent? b.) Future value at 13 percent_____ c.) What is the future value at an interst rate of 22 percent? c.) Future value at 22 percent_____What is the internal rate of return of an investment that requires a 10 percent minimum rate of return and has the following projected cash flows: Yr0 = -100, Yr1 = 25, Yr2 = 35, Yr3 = 45, Yr4 = 35, and Yr5 = 30? a. 19.33 percent b. 21.35 percent c. 20.05 percent d. 22.24 percentThe following data are gathered for: · The real risk-free rate is 1.25% · Inflation premium is constant at 2.50% · Default risk premium is 5% · Liquidity risk premium is 0.50% What is the quoted rate on a short-term government security? (Format: X.XX%)
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