Maddy was scheduled to make payments of $5,000 in 1% years from now, and $7,500 in 4 % years from now. She is proposing an alternative arrangement that would involve a payment in 6 months from now, followed by a payment of $11,000 in 3 % years from now. How much would the payment in 6 months from now need to be in order for the two streams to be economically equivalent? Assume that money can earn 5% compounded semi- annually. Hints: A timeline would be helpful and compare the payments at one focal point. Round to two places after the decimal. P/Y PV PMT FV Pmt P/Y PV PMT FV Pmt2 P/Y PV PMT FV Pmta The payment six months from now needs to be $ for both payment streams to

Maddy was scheduled to make payments of $5,000 in 1% years from now, and $7,500 in 4 % years from now. She is proposing an alternative arrangement that would involve a payment in 6 months from now, followed by a payment of $11,000 in 3 % years from now. How much would the payment in 6 months from now need to be in order for the two streams to be economically equivalent? Assume that money can earn 5% compounded semi- annually. Hints: A timeline would be helpful and compare the payments at one focal point. Round to two places after the decimal. P/Y PV PMT FV Pmt P/Y PV PMT FV Pmt2 P/Y PV PMT FV Pmta The payment six months from now needs to be $ for both payment streams to

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

Teal and Associates needs to borrow $35,000. The best loan they can find is one at 12% that must be repaid in monthly installments over the next years. How much are the monthly payments? (a) State the type. O present value future value O sinking fund O ordinary annuity O amortization (b) Answer the question. (Round your answer to the nearest cent.) $
Say that you want to establish a scholarship fund that will make fixed payments forever. To fund the scholarship, you plan to make 12 annual contributions of $9.9k to an investment account with an expected return of 6.0% interest annually. Your first contribution occurs today. If the scholarship fund makes its first payment two years following the last contribution, then what is the fixed annual payment that the scholarship fund will award? (Round to the nearest dollar)
A woman plans to make a total of eight equal deposits, with the first deposit one year from now and succeeding deposits at 2-year intervals, so that she will be able to withdraw $12500 per year for 10 years starting 22 years from now. How much must be the equal deposits if the interest rate is a nominal 12% per year compounded monthly?
Nick can invest $10,000 in either one of two annuities. Annuity A has a 6% annual interest rate and requires a starting principal of $9,000, plus annual $100 deposits for the next 10 years. Annuity B has a 12% annual interest rate and requires a starting principal of $9,000, plus annual $200 deposits for the next 5 years. What is the difference between the final balances of the two annuities?
Professor Wendy Smith has been offered the following deal: 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 8 hours of her time every month. Smith's rate is $550 per hour, and her opportunity cost of capital is 15% (equivalent annual rate, EAR). What is the IRR (annual)? What does the IRR rule advise regarding this opportunity? What is the NPV? What does the NPV rule say about this opportunity? The IRR (annual) is %. (Round to two decimal places.)
Sardor has been offered an investment that will pay him $500 three years from today. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today?
A new oven will save $120 per year in electricity expense. How much can we afford to pay for this oven if it is expected to last 15 years? The interest rate is 14% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 14% per year. The affordable amount of payment is $ (Round to the nearest dollar.)
You have 30 years left until retirement and want to retire with $2.6 million. Your salary is paid annually, and you will receive $76,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn a return of 9 percent on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Perentage of Salary:______________
You have your choice of two investment accounts. Investment A is a 6-year annuity that features end-of-month $3,000 payments and has an interest rate of 8 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an interest rate of 10 percent, also good for 6 years. How much money would you need to invest in B today for it to be worth as much as Investment A 6 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value
suppose you are given an option to invest in two annuity schemes scheme A and scheme B which of the options would you choose? scheme A scheme B Neither Both
Susan Carver will purchase a home for $280,000. She will use a down payment of 18% and finance the remaining portion at 5.7%, compounded monthly for 30 years. Complete parts (a) through (c) below. (a) What will be the monthly payment? Susan will pay $______ each month. (Round to the nearest cent as needed.) (b) How much will remain on the loan after making payment for 12 year. The amount remaining on the loan will be $______ (c) How much interest will be paid on the total amount of the loan over the course of 30 years? The amount of interest that will be paid is $____ (Round to the nearest cent as needed.)
You are offered a 3 year investment opportunity that requires investing USD 1,505 today. The investment will pay you an income of USD 66 in year 1. USD 76 in year 2 and USD 73 in year 3. At the end of year 3, it will also pay a total sum of USD 2,227. THE current discount rate is 0.13 percent. Is the investment worth undertaking? Give your answer in 0.000.

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