Ben Ramsay works for an investment company and is currently negotiating with three potential investors. The company offers two types of investment instrument available for new investors. Instrument alpha pays 10% annually. Instrument beta, on the other hand, pays 20% annually. Investors are allowed to divide their investments between these instruments such that a desired range of total return - between 10% to 20% is achieved. Suppose that the total investment of investor 1, investor 2, and investor 3,is PhP 20,000, PhP 50,000, and PhP 10,000, respectively. How much should each investor put money into each instrument? Investor 1: Instrument alpha = Php Instrument beta = PhP Investor 2: Instrument alpha = Php 25,000 Instrument beta = PhP 25,000 Investor 3: Instrument alpha = Php Instrument beta = Php

Ben Ramsay works for an investment company and is currently negotiating with three potential investors. The company offers two types of investment instrument available for new investors. Instrument alpha pays 10% annually. Instrument beta, on the other hand, pays 20% annually. Investors are allowed to divide their investments between these instruments such that a desired range of total return - between 10% to 20% is achieved. Suppose that the total investment of investor 1, investor 2, and investor 3,is PhP 20,000, PhP 50,000, and PhP 10,000, respectively. How much should each investor put money into each instrument? Investor 1: Instrument alpha = Php Instrument beta = PhP Investor 2: Instrument alpha = Php 25,000 Instrument beta = PhP 25,000 Investor 3: Instrument alpha = Php Instrument beta = Php

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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c. A person who invests $1, 600 each year finds one choice that is expected to pay 3 percent per year and another choice that may pay 4 percent. What is the difference in return if the investment is made for four years? Round your answer to the nearest dollar. (Hint: Use Appendox A-3 or the Garman/Forgue companion website.) Round Future Value of Series of Equal Amounts in intermediate calculations to four decimal places.
Professor Brad has been offered the following opportunity: A law firm would like to retain his for an upfront payment of $50000. In return, for the next year the firm would have access to eight hours of his time every month. As an alternative payment arrangement, the firm would pay Professor Brad's hourly rate for the eight hours each month. Brad's rate is $535 per hour and her opportunity cost of capital is 13 % per year. What does the IRR rule advise regarding the payment arrangement? (Hint: Find the monthly rate that will yield an effective annual rate of 13 %.) What about the NPV rule? A. What is the IRR?
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $4,440 at the end of each of the next 3 years. The opportunity requires an initial investment of $1,110 plus an additional investment at the end of the second year of $5,550. What is the NPV of this opportunity if the interest rate is 1.5% per year? What is the NPV of this opportunity if the interest rate is 1.5% per year? The NPV of this opportunity is $_______ (Round to the nearest cent)
Your group receives a phone proposal to invest in a new business. Thecaller informs you that it will take a $70,000 down payment and the investmentwill return $10,000 a year for the next 10 years. He tells you that theinvestment will return 14 percent. If current interest rates are 8 percent,what is the present value of this investment? How did the caller get14 percent?
Blossom Googal owns a garage and is contemplating purchasing a tire retreading machine for $32.820. After estimating costs and revenues, Blossom projects a net cash inflow from the retreading machine of $4,700 annually for 11 years. Blossom hopes to earn a return of 8% on such investments. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the present value of the retreading operation? (Round answer to 2 decimal places, eg. 25.25) Present value 2$ Should Blossom Googal purchase the retreading machine?
An investment promises to pay $7,000 at the end of each year for the next six years and $3,000 at the end of each year for years 7 through 10. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 15 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment?$ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 15 percent required rate of return?$
An investor is considering an investment that will pay $2,170 at the end of each year for the next 10 years. He expects to earn a return of 12 percent on his investment, compounded annually. Required: a. How much should he pay today for the investment? b. How much should he pay if the investment returns are received at the beginning of each year? (For all requirements, do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) a. Present value of ordinary annuity b. Present value of annuity due
Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment costs $1,000 today and provides a payoff, also described below, one year from now. Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000; 50% chance of receiving $1,200 3 50% chance of receiving $200; 50% chance of receiving $2,000 If Erik is risk averse, which investment will he prefer? The investor will choose option 1. The investor will choose option 2. The investor will choose option 3. The investor will be indifferent toward these options. Which kind of stock is most affected by changes in risk aversion? High-beta stocks Low-beta stocks All stocks are affected the same, regardless of beta. Medium-beta stocks
An investment promises to pay you $400 per year starting in 5 years. The cash flow from the investment is expected to increase by 2 percent per year forever. If alternative investments of similar risk earn a return of 9 percent per year, determine the maximum you would be willing to pay for the investment. (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.) Maximum amount you would be willing to pay $
Using the TVM calculator, compare the following if the investment pays 7%/a compound annually and payments are made until age 65. Calculate the future value of each investment and the total amount paid in. which would you choose? a) depositing $1500 every year starting at age 20. b) depositing $4500 every year starting at age 50.
You have an investment opportunity that promises to pay you $18,000 in four years. You could earn a 5% annual return investing elsewhere. What is the maximum amount you would be willing to invest in this opportunity? Note: Use tables, Excel, or a financial calculator. Round your final answer to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Ryan invested 56000 in Koy Rural Bank and Soy Rural Bank. Koy Rural Bank pays 8% interest per year, and Soy Rural Bank pays 10% per year.If the total interest earned on the investment is 5560 after one year.How much money was invested in each account

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