(Related to Checkpoint 5.6) (Solving for i) You are considering investing in a security that will pay you $4,000 in 26 years. a. If the appropriate discount rate is 12 percent, what is the present value of this investment? b. Assume these investments sell for $2,348 in return for which you receive $4,000 in 26 years. What is the rate of return investors earn on this investment if they buy it for $2,348? a. If the appropriate discount rate is 12 percent, the present value of this investment is $ (Round to the nearest cent.)

(Related to Checkpoint 5.6) (Solving for i) You are considering investing in a security that will pay you $4,000 in 26 years. a. If the appropriate discount rate is 12 percent, what is the present value of this investment? b. Assume these investments sell for $2,348 in return for which you receive $4,000 in 26 years. What is the rate of return investors earn on this investment if they buy it for $2,348? a. If the appropriate discount rate is 12 percent, the present value of this investment is $ (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 run a construction firm. You have just won a contract to build a government office building. It will take one year to construct it, requiring an investment of $8.96 million today and $5.00 million in one year. The government will pay you $21.50 million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 6%. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today? a. What is the NPV of this opportunity? The NPV of this opportunity is $ 6.61 million. (Round to two decimal places.) b. How can your firm turn this NPV into cash today? (Select from the drop-down menus.) The firm can borrow $20.28 million today, and pay it back with 6% interest using the $21.50 million it will receive from the government. The firm can use cover its costs today and save next year. This leaves in the bank to earn 6% interest to cover its cost of of the in cash for the firm today. to
(Related to Checkpoint 5.6) (Solving for i) You are considering investing in a security that will pay you $5,000 in 32 years. a. If the appropriate discount rate is 9 percent, what is the present value of this investment? b. Assume these investments sell for $896 in return for which you receive $5,000 in 32 years. What is the rate of return investors earn on this investment if they buy it for $896? a. If the appropriate discount rate is 9 percent, the present value of this investment is $nothing. (Round to the nearest cent.)
A financial instrument just paid the investor $127 last year. The cash flow is expected to last forever and increase at a rate of 1.6 percent annually. If you use a 5.2 percent discount rate for investments like this, what should be the price you are willing to pay for this financial instrument? (Round to the nearest dollar.)
You are considering a risky investment that you expect will either be worth 165,000 in 1 year, or 95,000, with probabilities of 0.6 and 0.4 for each outcome, respectively. You could invest in riskless T-bills at 0.047. If you invest in this risky investment, you would expect to earn a risk premium of 0.073 Given this information, what would you be willing to pay for this investment? O 113,881 O 106,615 O 118,358 O 122,321 O 109,991
Suppose the risk - free interest rate is 4.2%.a. Having $200 today is equivalent to having what amount in one year?b. Having $200 in one year is equivalent to having what amount today?c. Which would you prefer, $200 today or $200 in one year? Does your answer depend on when you need the money? Why or why not?a. Having $200 today is equivalent to having what amount in one year?Having $200 today is equivalent to having Sin one year. (Round to the nearest cent.)
You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $20,100 at the end of this year and subsequent payments that will grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity? (Round answer to 2 decimal places, e.g. 15.25.)
Dog You are considering the purchase of real estate that will provide perpetual income that should average$61,000 per year. How much will you pay for the property if you believe its market risk is the same as themarket portfolio%u2019s? The T-bill rate is 3%, and the expected market return is 12.5%.
you that will pay you $100,000 when you turn 25. If the relevant discount rate is 11 percent, how much is this fund worth today? (See Problem 3.) Calculating Rates of Return You've been offered an investment that will double your money in 12 years. What rate of return are you being offered? Check your answer using the Rule of 72. (See Problem 4.) 4.3 Calculatin
10. Finding the interest rate and the number of years The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations. If a security of $4,000 will be worth $5,324.00 three years in the future, assuming that no additional deposits or withdrawals are made, what is the implied interest rate the investor will earn on the security? ○ 6.00% ○ 7.50% ○ 10.00% ○ 12.00% If an investment of $35,000 is earning an interest rate of 11.00% compounded annually, it will take value of $58,977.04-assuming that no additional deposits or withdrawals are made during this time. for this investment to grow to a Which of the following statements is true, assuming that no additional deposits or withdrawals are made? If you invest $1 today at 15% annual compound interest for 82.3753 years, you'll end up with approximately $100,000. ○ If you invest $5 today at 15% annual compound interest for 82.3753 years,…
(Related to Checkpoint 5.6) (Solving for) You are considering investing in a security that will pay you $4,000 in 31 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $2,062 in return for which you receive $4,000 in 31 years. What is the rate of return investors earn on this investment if they buy it for $2,062? C a. If the appropriate discount rate is 10 percent, the present value of this investment is $. (Round to the nearest cent.)
6. If the effective interest rate is i per period and you invest b dollars at time 0, then the value at time n is b(1 + i)”. For example, if at time 0 you invest $100 at an effective interest rate of 6% per year, then the value at time 1 is $100(1+0.06) = $106. dollars. At time 2, the value will be $100 (1 + 0.06)² = $112.36. Similarly, the present value (value at time 0) of $100 received 2 years from now would be $100(1+0.06)-²≈ $88.99. Sometimes it's convenient to define d = 1/(1 + i) so that we would have $100(1+i)n = $100d". If the interest rate per year is i compounded semiannually, then the effective annual interest rate is (¹ + 2)²³ - 1₁ 1. For example, if the interest rate is 6% per year compounded semiannually, the effective annual interest rate is 1 + .06 2 2 - 1 ≈ 6.09%. If the interest rate per year is i compounded quarterly, then the effective annual interest rate is 4 (¹ + 4) * - 1 1. (a) If the interest rate is 6% per year compounded quarterly, what is the effective…
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $856 in 6 years. If your required return on investments of this risk is 21.75, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:

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