Using the time value of moneyYour grandfather would like to share some of his fortune with you. He offers to give youmoney under one of the following scenarios (you get to choose):|1. $8,750 per year at the end of each of the next seven years2. $50,050 (lump sum) now3. $100,250 (lump sum) seven years from nowRequirement1. Calculate the present value of each scenario using a 6% discount rate. Which scenarioyields the highest present value? Round to nearest whole dollar.2. Would your preference change if you used a 12% discount rate?

Given, Scenario 1 : $8750 per year at the end of each 7 years. Scenario 2 : $50,500 lupsum now…

Requirement 1. Calculate the present value of each scenario using a 6% discount rate. Which scenario yields the highest present value? Round to nearest whole dollar. 2. Would your preference change if you used a 12% discount rate?

Requirement 1. Calculate the present value of each scenario using a 6% discount rate. Which scenario yields the highest present value? Round to nearest whole dollar. 2. Would your preference change if you used a 12% discount rate?

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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Suppose that consumers have utility function U(C) = log(C) where C is the consumption level and log is the natural logarithm. Consumers have initial consumptionlevels of 100 and are exposed to the following risk of loss: lose 10 with probability0.4 and lose 5 with probability 0.6. They are considering buying insurance to coverthese losses. What is the certainty equivalent level of C when uninsured? (Hint: Findthe consumption level CEsuch that U(CE) equals the expected utility whenuninsured.)
a. What is the NPV of investing today? The NPV is $428,235.29. (Round to the nearest dollar.) b. What is the NPV of waiting and investing tomorrow? The NPV if the rate goes up is $0. (Round to the nearest dollar.) The NPV if the rate goes down is $ 563,404.25. (Round to the nearest dollar.) The PV is $444,242. (Round to the nearest dollar.) c. Verify that the hurdle rate rule of thumb gives the correct time to invest in this case. The hurdle rule is $249,887.64. (Round to the nearest dollar.) (Select from the drop-down menu.) The NPV <0, so wait
Let S = $100, K = $95, \sigma = 30%, r = 8% (continuously compounded), T = 1, and \delta = 0. Let u = 1.3, d=0.8, and n = 2. Construct the binomial tree for a European put option. At each node provide the premium, \Delta, and B.
Rahul
A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200. Probability Payoff Net Profit 0.30 $400 $200 0.60 300 100 0.10 0 –200 1. What is the expected cash payoff? Note: Round your answer to the nearest whole dollar amount. 2. What is the expected rate of return? Note: Enter your answer as a percent rounded to the nearest whole number. 1.What is the variance of the expected returns? Note: In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number. 2.hat is the standard deviation of the expected returns? Note: Enter your answer as a percent rounded to 2 decimal places.
A game of chance offers the following odds and payoffs. Each play of the game costs $200, so the net profit per play is the payoff less $200. Probability Payoff Net Profit 0.10 $700 $500 0.50 300 100 0.40 0 –200 a-1. What is the expected cash payoff? (Round your answer to the nearest whole dollar amount.) a-2. What is the expected rate of return? (Enter your answer as a percent rounded to the nearest whole number.) b-1. What is the variance of the expected returns? (In the calculation, use the percentage values, not the decimal values for the rates of return. Do not round intermediate calculations. Round your answer to the nearest whole number.) b-2. What is the standard deviation of the expected returns? (Enter your answer as a percent rounded to 2 decimal places.)
This section asks you to calculate prices for various options. In all cases, consider a rate r = 7.97% per year. Estimate the volatility of returns using the estimator: 1 n-1 σ²≈ T-t i=0 Si+1 log. Sti 2 The term of each option will be T = 182/360 (half a year). Determine a reasonable strike K, which is at similar levels to the price series you have downloaded. An option is a derivative instrument that gives its holder the right to buy or sell an underlying asset at a pre-agreed price K at a future date T. If this right can only be exercised in time T, we say that the option is of the European type. If it can be exercised at T or at any time prior to T, then we say that the option is American. Likewise, if the option grants the right to buy, we say that the option is Call type, if it grants the right to sell then the option is Puttype. These types of options are the simplest and are known as European vanilla options. In this case, if T is the expiration date of the contract, and St is…
1 & 2 are correct. I need help on 3. Please I need fast without plagiarism
am. 266.
A product manager prepared the following forecasts for a product line: 1 3 4 5 6 and later 2 + $2m $2m $3m $4m $4m g=2.5% If the appropriate discount rate is 8.5%, what is the present value of these future cash flows?
18% was the desirable rate of return? How did you come up with 15% and 20% PVF?

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