b. Mr LEO's father has made a will to give him an amount of $500,000 in 10 years .So Leo wants to borrow an amount from the bank to set up a fashion boutique in the nearest town. The business planner told him that he does not expect the present discount rate to change in these 10 years. The following information is given regarding the discount rate GDP growth of the country 1.2% 1.8 Beta Index in January 2020 16,570 17,590 Index in December 2020 Inflation 2.5% REQUIRED How much should he borrow from the bank now if he is planning to pay back the loan with the money he will get in 10 years of business return?
b. Mr LEO's father has made a will to give him an amount of $500,000 in 10 years .So Leo wants to borrow an amount from the bank to set up a fashion boutique in the nearest town. The business planner told him that he does not expect the present discount rate to change in these 10 years. The following information is given regarding the discount rate GDP growth of the country 1.2% 1.8 Beta Index in January 2020 16,570 17,590 Index in December 2020 Inflation 2.5% REQUIRED How much should he borrow from the bank now if he is planning to pay back the loan with the money he will get in 10 years of business return?
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:b. Mr LEO's father has made a will to give him an amount of
$500,000 in 10 years .So Leo wants to borrow an amount
from the bank to set up a fashion boutique in the nearest
town. The business planner told him that he does not
expect the present discount rate to change in these 10
years. The following information is given regarding the
discount rate
GDP growth of the country
Beta
Index in January 2020
Index in December 2020
Inflation
1.2%
1.8
16,570
17,590
2.5%
REQUIRED
How much should he borrow from the bank now if he is
planning to pay back the loan with the money he will get in
10 years of business return?
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