Jane just inherited $30,000 from a rich uncle. She decides to invest the money for a period of 5 1) years and then use the accumulated amount to make a down payment on a new house. EzMoney, Inc. is willing to pay 6% per year compounded monthly on a five-year investment, but they will charge an administrative fee that is 2% of the amount invested and this has to be paid initially at the time of investment. HiReturn, Inc., offers 5.75% per year compounded daily if she deposits the entire amount in their premier investment fund. Which investment option should Jane choose and why?

Jane just inherited $30,000 from a rich uncle. She decides to invest the money for a period of 5 1) years and then use the accumulated amount to make a down payment on a new house. EzMoney, Inc. is willing to pay 6% per year compounded monthly on a five-year investment, but they will charge an administrative fee that is 2% of the amount invested and this has to be paid initially at the time of investment. HiReturn, Inc., offers 5.75% per year compounded daily if she deposits the entire amount in their premier investment fund. Which investment option should Jane choose and why?

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

12. Marlon can purchase a company car for his real estate business for $30 000. Interest lost on the money used for the purchase is estimated at 6% per year, compounded quarterly. Alternatively, Marlon can lease the car for $4000 per year. a) Calculate the cost of keeping the car for five years, and then selling it for $12 000. Include the cost of lost interest on the money used for the purchase. b) Calculate the cost of leasing the car for five years. c) Which plan is a better deal for Marlon? How much more would he pay with the other plan?
You decide to do some remodeling in the kitchen. Your parents agree to lend you the money, but you insist on paying them interest. The agreement is that they will lend you $8000.00 at a simple interest rate of 2% per year. Once the interest amounts to $480, you agree to pay them back the $8000 plus the $480 interest. After how many months will you have to pay them back? Please answer step by step
Vanessa was supposed to make a payment of $3,500 in 2 years and another payment for $1,800 in 5 years to Loon Company as part of a payment plan. Instead, he is trying to reach an agreement with the company where he would pay an upfront amount now, and an amount of $1,600 in 4 years. Assume that money is worth 8.40% compounded quarterly. a. Calculate the equivalent value of the $3,500 payment and the $1,800 payment today. Round to the nearest cent b. Calculate the upfront amount that he should pay under the alternative payment agreement so that the payments are equivalent. Round to the nearest cent.
The owner of a pizza restaurant needs to buy a new pizza oven for the restaurant. The oven costs $450, is expected to last 5 years, and will be depreciated using the straight line method. If the total cash inflows from the new oven are constant at $750 for the next 5 years, and the total cash outflows are constant at $380 for the next 5 years, determine the cash flow for the pizza restaurant in the second year assuming the tax rate is 34%. $ Place your answer in dollars and cents.
Christina Sanders is concerned about the financing of a home. She saw a small Cape Cod–style house that sells for $90,000. If she puts 10% down, what will her monthly payment be at (a) 30 years, 5%; (b) 30 years, 512%512% ; (c) 30 years, 6%; and (d) 30 years, 612%612% ? What is the total cost of interest over the cost of the loan for each assumption? (Round your answers to the nearest cent.) can you please help me with all 4 answers? ty
You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. Thesign will cost $4,300 and will be posted for one year. You expect that it will generate additionalrevenue of $817 a month. What is the payback period?
Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of $50,000. In return, for the next year the firm would have access to eight hours of her time every month. As an alternative payment arrangement, the firm would pay Professor Smith's hourly rate for the eight hours each month. Smith's rate is $545 per hour and her opportunity cost of capital is 11% 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 11%.) What about the NPV rule? The annual IRR is%. (Round to two decimal places.)
After Shipra got a job, the first thing she bought was a new car. She took out an amortized loan for $45,000—with no ($0) down payment. She agreed to pay off the loan by making annual payments for the next four years at the end of each year. Her bank is charging her an interest rate of 10% per year. Yesterday, she called to ask that you help her compute the annual payments necessary to repay her loan. Calculate the annual payment and complete the following loan amortization table: Year Beginning Amount Payment Interest Paid Principal Paid Ending Balance 1 $45,000.00 2 3 4 -$0.02
Christina Sanders is concerned about the financing of a home. She saw a small Cape Cod–style house that sells for $90,000. If she puts 10% down, what will her monthly payment be at (a) 30 years, 5%; (b) 30 years, 512%512% ; (c) 30 years, 6%; and (d) 30 years, 612%612% ? What is the total cost of interest over the cost of the loan for each assumption? (Round your answers to the nearest cent.)
Laura wants to buy a delivery truck. The truck costs $114,000 , and will allow her to increase her after tax profits by $17,000 per year for the next 10 years. She will borrow 99% of the cost of the truck for 10 years, at an interest rate of 6%. Laura’s unlevered cost of capital is 15% and her tax rate is 22%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms?
The Jacksons want to buy a condo in Langley. This will be their first property. Their combined gross annual salary is $108,000. They estimate that the property taxes are $2,400/year, strata fees $200/month and heating costs average $50/month. Banks use the affordability rule: no more than 32% of gross monthly hosehold income can go tawards paying the mortgage, property taxes, heating costs and 50% of the condo fees. What is the maximum monthly mortgage payment they could afford? Your Answer: Answer
Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for $75,000. Assuming that she puts 20% down, what will be her monthly payment and the total cost of interest over the cost of the loan for each assumption? (Use the Table 15.1) Note: Do not round intermediate calculations. Round your answers to the nearest cent. a. 25 Years, 5.00% b. 25 Years, 5.50% c. 25 Years, 5.75% d. 25 Years, 6.00% Monthly payment Total cost of interest e. What is the savings in interest cost between 5.00% and 6.00%? Note: Round your answer to the nearest dollar amount. Interest cost

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