Problem 11-6 Market values Suppose the current price of gold is $1,500 an ounce. Hotshot Consultants advises you that gold prices will increase at an average rate of 12% for the next two years. After that the growth rate will fall to a long-run trend of 1% per year. Assume that gold prices have a beta of 0 and that the risk-free rate is 5.5%. What is the present value of 1.5 million ounces of gold produced in 8 years? Note: Do not round intermediate calculations. Enter your answer in billions rounded to 2 decimal places. Present value billion

Problem 11-6 Market values Suppose the current price of gold is $1,500 an ounce. Hotshot Consultants advises you that gold prices will increase at an average rate of 12% for the next two years. After that the growth rate will fall to a long-run trend of 1% per year. Assume that gold prices have a beta of 0 and that the risk-free rate is 5.5%. What is the present value of 1.5 million ounces of gold produced in 8 years? Note: Do not round intermediate calculations. Enter your answer in billions rounded to 2 decimal places. Present value billion

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

See similar textbooks

Similar questions

QUESTION 17 Lulu Hypermarket plans to open a new branch in Sitra. The branch will initially cost them 34,668 BD and will generate a return of 6,689 BD, 6,704 BD, 9,076 BD and 5,909 BD respectively for the next four years. Calculate the investment's Pl if the cost of capital is 12%.
Vijay
QUESTION 19 Lulu Hypermarket plans to open a new branch in Sitra. The branch will initially cost them 42,469 BD and will generate a return of 6,868 BD, 9,698 BD, 6,359 BD and 5,719 BD respectively for the next four years. Calculate the investment's PI if the cost of capital is 12%. OUe TIC N 1
Problem 24-14 Predicting default probability Upsilon's assets have a current market value of $100. Its debt has a face value of $60, and it matures in one year. Assume a risk-free rate of interest is 5%. Suppose that the standard deviation of the return on Upsilon's assets is 50%. Calculate the probability that the company will default. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Probability %
Problem 11 Intro You have $22,000 to invest. The spot rate for the euro is $1.16 per euro, while the 180-day forward rate is $1.17 per euro. The six-monthly interest rate in the euro area is 6% and in the U.S. it is 3%. Attempt 5/10 for 8 pts. Part 1 What is your risk-free rate of return (yield) from exploiting the higher interest rate in the euro area? Submit
QUESTION 10 Beatrice owns two investments, A and B, that have a combined total value of $28,100.00. Investment A is expected to pay $25,180.00 in 4 years from today and has an expected return of 12.77 percent per year. Investment B is expected to pay $21,594.06 in 5 years from today and has an expected return of R per year. What is R, the expected annual return for investment B? O 11.50% (plus or minus 10bps) O 14.58% (plus or minus 10bps) O 10.73% (plus or minus 10bps) O 9.50% (plus or minus 10bps) O none of the answers are within 10bps of the correct answer
Question 8 You owe $40,000 in 2 years' time. Annualised yields are 7% at all horizons. There is a 1-year zero-coupon bond, and a 5-year annuity paying $4 per year. To the nearest cent, how much should you invest in the 1-year bond and 5-year annuity to immunise yourself against interest rate risk?
QUESTION 11 A 30 year 1/1 ARM has an initial rate of 3.75%. In the future, the rate will reset to 325 basis points above the LIBOR index with no rate caps or floors. In 1 year, at the time of the first reset, the LIBOR is 1%. What will be the fully indexed rate at the first reset? OA. 7.00% O B. 1.00% O C. 4.75% O D.4.25%
#7
QUESTION 9 If you invest $5100 per year in a stock that grows at rate of 6% per year, how much will your stock be worth after 12 years? QUESTION 10 If you have $47,000 in student loans at an interest rate of 5%, compounded monthly, what is the monthly payment necessary to pay them QUESTION 11 If the demand equation is D(x) = 109 - 3.9x and the supply equation is S(x) = 6.3x + 35, find the equilibrium quantity.
9
QUESTION 2 • The following two investment options are viewed under an annual effective interest rate of i. Investment A is a 10-year zero coupon bond which redeems at par-value 250. Investment B is a perpetuity-immediate paying an annual payment starting with 4 and having each successive payment increase by K% from the previous payment. • If the volatility of each investment is 8, then find the value of K. Give your answer as a decimal rounded to two places (i.e. X.XX)...i.e. if your answer was K% = 2.54%, you would answer 2.54. ||

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS