Elinore is asked to invest $4,900 in a friend's business with the promise that the friend will repay $5,390 in one year's time. Elinore finds her best alternative to this investment, with similar risk, is one that will pay her $5,292 in one year's time. U.S. securities of similar term offer a rate of return of 7%. What is the opportunity cost of capital in this case? ... O A. 9% О В. 10% O C. 8% O D. 7%

Elinore is asked to invest $4,900 in a friend's business with the promise that the friend will repay $5,390 in one year's time. Elinore finds her best alternative to this investment, with similar risk, is one that will pay her $5,292 in one year's time. U.S. securities of similar term offer a rate of return of 7%. What is the opportunity cost of capital in this case? ... O A. 9% О В. 10% O C. 8% O D. 7%

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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Similar questions

Your friend told you about an NFT (Non-fungible Token) that they think will be worth $996 in 6 years. If your required return on investments of this risk is 16.5%, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.
a friend comes to you for advice. He is faced with two investment choices.)(Choice 1: Place a RM 50,000 investment with an index fund for one year. (An index fund is a mutual fund that invests in a portfolio that tracks the index).)Choice 2: Place the RM 50,000 with an Index linked bank deposit that a local bank is offering. Under this scheme, a depositor gets back his entire capital and zero interest if the FBMKLCI is lower than the day he placed his deposit. On the other hand, if the FBMKLCI rises, then the depositor gets his initial deposit 10% of the percentage rise in the FBMKLCI over the one year.)(i) (Demonstrate using graph, the payoff profile of each alternative (plot the maximum loss, maximum profit and break even point)) (ii) Describe the risk profile of each alternative.) (iii) Explain two key factors that your friend ought to consider in deciding between the two alternatives)
Assuming you have PHP50,000 in excess funds. In which investment vehicle will you put your hard-earned money: (a) in the equities market to purchase an equity instruments i.e., invest in a newly-launched initial public offering (IPO) of an established Philippine company and/ or purchase existing listed shares from the Philippine stock market (Phil. Stock Exchange) or (b) in the debt market to purchase a debt instrument i.e., purchase newly issued long term 5-year fixed rate bond offering of San Miguel Brewery (as an example)? State your answer by discussing the advantages and disadvantages of both options.
Abdullah want to choose a better option for making investment, help him to decide which the better option is by calculating time value of money for the following: a) An investment of OMR. 50000 in a Bond which pays 6.75% interest for 15 years. b) A Bank deposit of OMR. 50000 which pays 6.75% interest for 15 years but compounding is done quarterly. c) Which of the two options should Abdullah accept? Why d) Assume yourself in place of Abdullah and share which investment would you prefer from the available investment opportunities in Oman? ijis Jia
A rich, friendly, and probably slightly unbalanced benefactor offers you the opportunity to invest $1 million today in two mutually exclusive ways. The payoffs are: $2 million after 1-year, a 100% return; or $300,000 a year forever. Neither investment is risky, and safe securities are yielding 7%. Which investment should you take? You can’t take both, so the choices are mutually exclusive. Should you want to earn a high percentage, or should you want to be rich? Applying the net present value method and the internal rate of return method should help to guide you in your decision. And, the present value of a perpetuity is equal to the cash payment divided by the interest rate. Earn a high percentage. Be rich.
Your friend offers you an investment opportunity. If you give him $1,200 today, his project will provide you with the following cash flows in Years 1-4: $100, $200, $600, $550. You required 10% return on investments of this risk level. Alternatively, you can invest your $1,200 in the money market fund at 4% today. Which of the two options is a better investment opportunity? Q4. There are two different ways to answers the question (both lead to the same conclusion). Show the complete formula (not the calculator shortcuts) with all the necessary terms that you would use to solve the problem as if you didn't have a financial calculator on hand. Q5. Circle the better investment opportunity: Friend's project / Money market fund
You are considering a risky investment that you expect will either be worth 165,000 in 1 year, or 95,000, with probabilities of 0.6 and 0.4 for each outcome, respectively. You could invest in riskless T-bills at 0.047. If you invest in this risky investment, you would expect to earn a risk premium of 0.073 Given this information, what would you be willing to pay for this investment? O 113,881 O 106,615 O 118,358 O 122,321 O 109,991
Trisha is having difficulty in deciding as to which investment firm she will choose: Bugal Ventures, which offers 11.68% simple exact interest; or Vidad Financing offering 11.52%simple ordinary interest. Is she is to invest ₱1,000,000 for 120 days which investment firm will you recommend? Why?
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $350,000 Rolls-Royce Phantom. Jack currently has $18,570 that he may invest. He has found a mutual fund with an expected annual return of 7 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is years. (Round to one decimal place.)
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $340,000 Rolls-Royce Phantom. Jack currently has $22,400 that he may invest. He has found a mutual fund with an expected annual return of 7 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is years. (Round to one decimal place.)
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $856 in 6 years. If your required return on investments of this risk is 21.75, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
A person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% per annum, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes more attractive?

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