Shahrul is considering an investment that will generate cash flows of RM800 in the first year, RM500 in the second year, RM400 in the third year, and RM700 in the fourth year. His possible interest rate is 10 percent. What is the maximum amount he should be willing to pay for his investment? Answer O RM1852.52 O RM1919.10 O RM1959.52 O RM1724.32

Shahrul is considering an investment that will generate cash flows of RM800 in the first year, RM500 in the second year, RM400 in the third year, and RM700 in the fourth year. His possible interest rate is 10 percent. What is the maximum amount he should be willing to pay for his investment? Answer O RM1852.52 O RM1919.10 O RM1959.52 O RM1724.32

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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Your friend offers you an investment opportunity. If you give him $1,200 today, his project will provide you with the following cash flows in Years 1-4: $100, $200, $600, $550. You required 10% return on investments of this risk level. Alternatively, you can invest your $1,200 in the money market fund at 4% today. Which of the two options is a better investment opportunity? Q4. There are two different ways to answers the question (both lead to the same conclusion). Show the complete formula (not the calculator shortcuts) with all the necessary terms that you would use to solve the problem as if you didn't have a financial calculator on hand. Q5. Circle the better investment opportunity: Friend's project / Money market fund
Suppose that immediately after making the fifth payment to Joseph as described above, Wagon Financial also implements a new investment strategy which they believe will yield even higher investment returns than the original 12% per annum. Assuming this to be true, would Wagon Financial need to set aside more or less money than your answer in part f) to be sure that they can afford to make all future payments to Joseph? Justify your answer.
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.)
I had an investment opportunity that requires an initial investment of GH¢5000 today and will pay GH¢6000 on a year's time. So if i had an alternative imvestment with similar risk of 25%, should i invest??
A new investor is considering investing in the Real Estate Investment Trust (REIT) with the following cash flows. REIT investment Cash Outflow RM20000 Year Cash Inflow RM15000 RM8000 RM12000 RM10000 RM8000 RM5000 If the cost of capital is 15% per annum, advise the investor on the course of action.
(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.)
You were offered RM2075.30, 10 years from now in return for an investment of RM800. Calculate the annual rate of interest you would earn if you took the offer
4
4. Present value Finding a present value is the reverse of finding a future value. is the process of calculating the present value of a cash flow or a series of cash flows to be received in the future. Which of the following investments that pay will $19,000 in 14 years will have a higher price today? The security that earns an interest rate of 7.00%. The security that earns an interest rate of 10.50%. Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 9.60%. Assuming that both investments have equal risk and Eric’s investment time horizon is flexible, which of the following investment options will exhibit the lower price? An investment that matures in five years An investment that matures in six years Which of the following is true about present value calculations? Other things remaining equal, the present value of a…
A person is to invest some amount of money, and the bank offers him two different investments. One with a simple interest of 12% per annum, secondly 9% per year, compounded annually. At what value of the life of the loan, the second alternative becomes more attractive?

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