Luis won the lottery; however, the lottery company gave him the following two options to receive his prize money: Option (a): $8,000 in two months and $18,000 in eleven months. Option (b): $4,000 immediately and $24,000 in fourteen months. Assume that money earns 4.5% p.a. simple interest and use today as the focal date. a. What was the equivalent value of the payments under option (a) at the focal date? $0.00 Round to the nearest cent b. What was the equivalent value of the payments under option (b) at the focal date? $0.00 Round to the nearest cent c. Which option would be economically better for Luis and by how much? o a. Option (a) o b. Option (b) is better by $0.00 Round to the nearest cent

Luis won the lottery; however, the lottery company gave him the following two options to receive his prize money: Option (a): $8,000 in two months and $18,000 in eleven months. Option (b): $4,000 immediately and $24,000 in fourteen months. Assume that money earns 4.5% p.a. simple interest and use today as the focal date. a. What was the equivalent value of the payments under option (a) at the focal date? $0.00 Round to the nearest cent b. What was the equivalent value of the payments under option (b) at the focal date? $0.00 Round to the nearest cent c. Which option would be economically better for Luis and by how much? o a. Option (a) o b. Option (b) is better by $0.00 Round to the nearest cent

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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You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years. If you pay $20,000 for the GIC today and receive no interest along the way, you will get __________ in 6 years (to the nearest dollar). (Round your answer to the nearest whole dollar).
Investment X offers to pay you $5,800 per year for eight years, whereas Investment Y offers to pay you $7,900 per year for five years. Use Appendix D. (Round "PV Factor" to 3 decimal places. Round the final answers to 2 decimal places.) Calculate the present value for Investment X and Y If the discount rate is 5%. Investment X Investment Y Present value Investment X Investment Y 14 Calculate the present value for Investment X and Y If the discount rate is 15%. Present value M PA
c) Man - Duen wants to buy a $28,000.00 T - bill that matures on 2019 - 12 - 08. His target price is $27,729.66, the (annual) simple interest rate is 3.120% and the daycount convention is ACT /360. What is the last date on which he can still buy the T - bill? How much does he pay?
An investor is looking for a loan for an investment property that he has found. He can afford a monthly payment of $1,475. The interest rated quoted to him was 7.25%. He built the following table from that information. A $74,049 $125,638 $161,580 t 5 10 15 a) A(5) = b) If the investment property cost $161,580, how many years must the investor make monthly payments? t 20 25 30 A $186,620 $204,066 $216,220
Your answer is incorrect. Sheridan Company is considering investing in an annuity contract that will return $33,500 annually at the end of each year for 15 years. Click here to view the factor table. What amount should Sheridan Company pay for this investment if it earns an 10% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 25.25.) Sheridan Company should pay $ eTextbook and Media Save for Later SUPP Attempts: 2 of 3 used Submit Answer
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage loan for 75 percent of the $3,000,000 purchase price. The monthly payment on this loan will be $17,100. a. What is the APR on this loan? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the EAR on this loan? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Bill Padley expects to invest $6,000 for 3 years, after which he wants to receive $6,945.60. What rate of interest must Padley earn? (PV of $1. EV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Future Value Present Value Table Factor Interest Rate %
3) You are purchasing a car and have the option to pay $25,000 in cash (upfront) OR assume a lease with end of the month payments of $399 for five years. By purchasing, you will receive an estimated residual value (or scrap value) by selling the car for $2,500 at the end of the 5 years. If interest is 2.7% compounded annually, which financing option would you prefer? (16.1 DCF)
You agree to purchase a car with a competitive value of $44,500 for the following loan contract: Purchase the car for $44,250 with $2,000 down and borrow the remainder over 5 years with monthly payments based on a rate of interest of 6.6%. Your market rate of return is 5.25%. How much value did you destroy with this purchase? (Round to dollars and cents; round the car payment to dollars and cents.)
You have a choice between a lottery lump sum payout of $10,000,000 today or a series of thirty annual annuity payments (first payment one year from today). At a discount rate of 7.50%, how large must the annual annuity payments be to make you indifferent between the two choices? A. $819,814.81 B. $846,712.36 C. $400,000.00 D. $833,102.77
Imagine that you won $100 million in the lottery and were offered the choice between two payment plans: Plan A: Receive $61 million in a lump sum today Plan B: Receive an initial payment of $1.5 million today and annual payments that increase by 5% annually over the next 29 years (30 payments total) a. Determine the net present value of each plan without discounting. Which plan is the better option? b. Assuming an interest rate of 4%, determine the future value of each plan at the end of the 29 years with discounting. Which plan is the better option?

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