Answered: If an investor intends to double…

If an investor intends to double $35,000 by investing in a bank that pays 6% interest per year, determine the time it would take to double the investment.

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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(Comprehensive problem) You would like to have $54,000 in 16 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 6 percent interest compounded annually. Your first payment will be made at the end of the year. a. How much must you deposit annually to accumulate this amount? b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should this lump-sum deposit be? (Assume you can earn 6 percent on this deposit.) c. At the end of five years, you will receive $20,000 and deposit this in the bank toward your goal of $54,000 at the end of year 16. In addition to the lump-sum deposit, how much must you deposit in equal annual amounts, beginning in year 1 to reach your goal? (Again, assume you can earn 6 percent on your deposits.) a. How much must you deposit annually to accumulate this amount? (Round to the nearest cent.)
Suppose an agent has $100,000 today that he wants to save for 10 years. Compare the following two savings plans. Bank A offers the following alternative: For the first $50,000 the agent obtains 8% p.a. (per annum) for 10 years. For the other amount he obtains 4% p.a. for the first four years. Then he obtains 2% p.a. Bank B offers the following alternative: The interest in year 1 is 2%, in year 2 is 4%, in year 3 is 8%, in year 4 is 30%, then for years 5 to 10 the agent obtains 2% p.a. For both plans, interest payments are reinvested. (a) The agent maximizes the amount at t=10. Which plan is better? How much more can he spend at t=10, if he chooses the better one? (b) Suppose bank B wants to match the offer of bank A. Interest rates for years 2 to 10 are as above. What interest rate for the first year must bank B offer the agent so that he gets the same amount as from bank A?
A local bank is advertising that you can double your money in eleven years if you invest with them. What simple interest rate is the bank offering?
A person who invests $1,000 each year finds one choice that is expected to pay 4 percent per year and another choice that may pay 7 percent. What is the difference in return if the investment is made for four years?
A borrower takes out a 30-year loan for a house worth $250,000. If the annual interest rate is 6%. if the borrower chooses to pay $40,000 at the end of year 12, what will the new payments be assuming the loan maturity will not be reduced?
Investment A requires you to pay $30,000 at t = 0 and you will receive $49,000 after five years. Investment B costs $73,000 and provides a cash flow of $128,000 after seven years. What is the rate of return for each of the two investments?
-ten years ago, Amanda Cortez invested $20,000 in an account paying an annual interest rate of 5%. What is the value of the investment today? What is the interest on interest earned on this investment? -You have just won a lottery that promises an annual payment of $130,000 beginning immediately. You will receive a total of 12 payments. If you can invest the cash flow in an investment that is paying 7% annually, what is the present value of this annuity? -A company had cash and marketable securities worth $100,000 accounts payables worth $60,000 inventory of $2,501,500, accounts receivables of $5,500,000 short-term notes payable worth $200,000, other current liabilities of 100,000, and other current assets of $212,800. Calculate the company net working capital and describe how managers manage the firm working capital. -Your parents have given you $2,500 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in…
If you borrow $25,000 from a local finance company and you are required to pay $4,424.50 per year for 10 years, what is the annual interest rate on the loan?
How much would your investment be worth if you deposited $5,555.55 into a bank that paid simple interest of 4% for 10 years?
You have just received a windfall from an investment you made in a friend's business. He will be paying you $17,752 at the end of this year, $35,504 at the end of the following year, and $53,256 at the end of the year after that (three years from today). The interest rate is 11.7% per year. a. What is the present value of b. What is the future value of your windfall in three years (on the date of the last payment)? your windfall? a. What is the present value of your windfall? The present value of your windfall is $ (Round to the nearest dollar.) b. What is the future value of your windfall in three years (on the date of the last payment)? The future value of your windfall in three years is $ (Round to the nearest dollar.)
An investor pays £300 now in order to get £150 in 4 years' time and £200 in 8 years' time. What is the annual effective rate of interest earned on this investment?
Greg wants to have $50 000 in five years. He has $20 000 today to invest. The bank is offering five- year investment certificates that pay interest compounded quarterly. What is the minimum nominal interest rate he would have to receive to reach his goal?

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