If Samantha invests $700 today in an account that pays 4% interest compounded annually, how much will she have in her account four years from today? How much will she have in eight years and 12 years from today? (Use Future Value of a Lump Sum) What is the present value of $1,500 due in 14 years at a 5% interest rate? At a 10% interest rate? Explain why the present value is lower when the interest rate is higher. (Use Present Value of a Lump Sum) Matt is considering the purchase of an investment that will pay him $12,500 in 12 years. If Matt wants to earn a return equal to 7% per year (annual compounding), what is the maximum amount he should be willing to pay for the investment today? (Use Present Value of a Lump Sum Amount)
If Samantha invests $700 today in an account that pays 4% interest compounded annually, how much will she have in her account four years from today? How much will she have in eight years and 12 years from today? (Use Future Value of a Lump Sum) What is the present value of $1,500 due in 14 years at a 5% interest rate? At a 10% interest rate? Explain why the present value is lower when the interest rate is higher. (Use Present Value of a Lump Sum) Matt is considering the purchase of an investment that will pay him $12,500 in 12 years. If Matt wants to earn a return equal to 7% per year (annual compounding), what is the maximum amount he should be willing to pay for the investment today? (Use Present Value of a Lump Sum Amount)
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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Percentages need to be entered in decimal format, for instance 3% would be entered as .03 in the interest rate cells.)
- If Samantha invests $700 today in an account that pays 4% interest compounded annually, how much will she have in her account four years from today? How much will she have in eight years and 12 years from today? (Use
Future Value of a Lump Sum) - What is the
present value of $1,500 due in 14 years at a 5% interest rate? At a 10% interest rate? Explain why the present value is lower when the interest rate is higher. (Use Present Value of a Lump Sum) - Matt is considering the purchase of an investment that will pay him $12,500 in 12 years. If Matt wants to earn a return equal to 7% per year (annual compounding), what is the maximum amount he should be willing to pay for the investment today? (Use Present Value of a Lump Sum Amount)
- At the end of each of the past 14 years, Vanessa deposited $450 in an account that earned 8% compounded annually. How much is in the account today? How much would be in the account if the deposits were made at the beginning of each year (PMT Type) than at the end of each year? (Use Future Value of an
Annuity ) - Suppose your
opportunity cost (interest rate/year) is 11% compounded annually. How much must you deposit in an account today if you want to pay yourself $230 at the end of each of the next 15 years? How much must you deposit if you want to pay yourself $230 at the beginning of each of the next 15 years? - Bruce invested $1,250 (present value - enter as a negative number) 10 years ago. Today, the investment is worth $3,550 (future value). If interest is compounded annually, what annual
rate of return did Bruce earn on his investment? (Use Solving for r - Rate of Return- on a Lump Sum) - Mario wants to take a trip that costs $4,750 (future value), but currently he only has $2,260 (present value - enter as a negative number) saved. If Mario invests this money at 7% compounded annually, how long will it take for his investment to grow to the needed amount of $4,750? Round to the nearest whole number representing the number of years. (Use Solving for n - Time - on a Lump Sum)
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