Global Investment Corporation is exploring multiple investment opportunities to invest about $20 M. Four investment opportunities are being carefully evaluated. If the company is interested in maximizing the return on investment, which one is offers the best opportunity. i. ii. 12% compounded quarterly. 11.85% compounded daily. 11.95% compounded monthly. 11.82% compounded continuously. 14% Simple interest rate iii. iv. V.

Global Investment Corporation is exploring multiple investment opportunities to invest about $20 M. Four investment opportunities are being carefully evaluated. If the company is interested in maximizing the return on investment, which one is offers the best opportunity. i. ii. 12% compounded quarterly. 11.85% compounded daily. 11.95% compounded monthly. 11.82% compounded continuously. 14% Simple interest rate iii. iv. V.

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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12. Nonannual compounding period The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. A. An investor can invest money with a particular bank and earn a stated interest rate of 6.60%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate B. You want to invest $24,000 and are looking for safe investment options. Your bank is offering you a certificate of deposit that pays a nominal rate of 6% that is compounded quarterly. What is the effective rate of return that you will earn from this investment? 6.221% 5.995% 6.014% 6.136% C. Suppose you decide to deposit $24,000 in a savings account that pays a nominal rate of 12%, but interest is…
3
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
Investment Rate Compounding A 6.846% Annual B 6.6458% Daily C 6.7245% Quarterly D 6.7107% Monthly The lowest effective rate of return you could earn on any of these investments is closest to: A. 6.846% Your answer is correct. B. 6.921% C. 6.896% D. 6.871%
Question 2 Which one of the following banks has the highest and which one has the lowest EAR for your investment? And WHY? Bank 1: Pays 8.5% APR with monthly compounding. Bank 2: Pays 9% APR with daily compounding.Bank 3: Pays 9% APR with annual compounding. Bank 4: Pays 8.5% APR with daily compounding.
10
Solve part c
Tools Introductory ce An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6. a. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent. $ b. If other investments of equal risk earn 4% annually, what is its future value? Round your answer to the nearest dent. D
question 10 What is the present value of investment A, B, and C at an annual discount rate of 22 percent round to nearest cent?
Investment End of Year A B C 1 $ 13,000 $ 18,000 2 13,000 3 13,000 4 13,000 5 13,000 $ 13,000 6 13,000 54,000 7 13,000 8 13,000 9 13,000 10 13,000 18,000 Assuming an annual discount rate of 23 percent, find the present value of each investment. a. What is the present value of investment A at an annual discount rate of 23 percent? b. What is the present value of investment B at an annual discount rate of 23 percent? c. What is the present value of investment C at an annual discount rate of 23 percent?
Question 2 The following interest rate structures are on offer by three independent banks: Tree Bank: 16% compounded annually; Branch Bank: 15% compounded monthly; Leaf Bank: 15% compounded quarterly. Note: Assume 365 days in a year. Q.2.2 Rank the three options from most preferable to least preferable to a borrower, with a reason why.
5-8 present and future values of a cash flow stream.An investment will pay $100 at the end of each of the next 3years $200 at the end of year 6. If other investment of equal risk earn 5% annually what is it's present value? it's future value

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