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Show your excel workings for the following problems. Round up to two decimal places if necessary. 1. Sarah would like to make a single investment and have 125 million at the time of her retirement in 11 years. She has found a mutual fund that will earn 10 percent semi-annually. How much will Sarah have to invest today? What if Sarah is a finance major and learns how to earn a 15 percent annual return - how

Show your excel workings for the following problems. Round up to two decimal places if necessary. 1. Sarah would like to make a single investment and have 125 million at the time of her retirement in 11 years. She has found a mutual fund that will earn 10 percent semi-annually. How much will Sarah have to invest today? What if Sarah is a finance major and learns how to earn a 15 percent annual return - how

Essentials Of Investments
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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PART II Show your excel workings for the following problems. Round up to two decimal places if necessary. 1. Sarah would like to make a single investment and have 125 million at the time of her retirement in 11 years. She has found a mutual fund that will earn 10 percent semi-annually. How much will Sarah have to invest today? What if Sarah is a finance major and learns how to earn a 15 percent annual return - how soon could she then retire? 2. Freilyn Angob, a Filipina working in the UAE, has won in an Emirates Lotto Draw where she will receive Php 387,000 a month for 25 years. If she decides to save 50% of those earnings every year and put into an account that pays 8% interest, how much will her savings be after 25 years? 3. How risky is your portfolio if you have invested 50% to security 1 and 50% to security 2? What if based on your research, the risk will be minimized if you changed the composition of your portfolio to be 20% of security 1 and the rest to security 2. Is your analysis correct? State of Nature 1 2 3 4 5 Probability 0.35 0.15 0.10 0.10 0.30 Return, Security 1 -20% 15 25 45 60 Return, Security 2 10% -13 -5 20 25 4. Consider a $1,000 par value bond issued by ACEN with a maturity date of 2045 and a stated coupon rate of 8.5 percent that pays interest on an annual basis. On January 1, 2023, the bond had 23 years left to maturity, and the market's required yield to maturity for similarly rated debt was 7.5 percent. What is the value of the bond? 5. Consider the valuation of a share of common stock that paid a $2 dividend at the end of last year and is expected to pay a cash dividend every year from now to infinity. Each year the dividends are expected to grow at a rate of 10 percent. Based on an assessment of the riskiness of the common stock, the investor's required rate of return is 15 percent. What is the value of this common stock?
Transcribed Image Text:PART II Show your excel workings for the following problems. Round up to two decimal places if necessary. 1. Sarah would like to make a single investment and have 125 million at the time of her retirement in 11 years. She has found a mutual fund that will earn 10 percent semi-annually. How much will Sarah have to invest today? What if Sarah is a finance major and learns how to earn a 15 percent annual return - how soon could she then retire? 2. Freilyn Angob, a Filipina working in the UAE, has won in an Emirates Lotto Draw where she will receive Php 387,000 a month for 25 years. If she decides to save 50% of those earnings every year and put into an account that pays 8% interest, how much will her savings be after 25 years? 3. How risky is your portfolio if you have invested 50% to security 1 and 50% to security 2? What if based on your research, the risk will be minimized if you changed the composition of your portfolio to be 20% of security 1 and the rest to security 2. Is your analysis correct? State of Nature 1 2 3 4 5 Probability 0.35 0.15 0.10 0.10 0.30 Return, Security 1 -20% 15 25 45 60 Return, Security 2 10% -13 -5 20 25 4. Consider a $1,000 par value bond issued by ACEN with a maturity date of 2045 and a stated coupon rate of 8.5 percent that pays interest on an annual basis. On January 1, 2023, the bond had 23 years left to maturity, and the market's required yield to maturity for similarly rated debt was 7.5 percent. What is the value of the bond? 5. Consider the valuation of a share of common stock that paid a $2 dividend at the end of last year and is expected to pay a cash dividend every year from now to infinity. Each year the dividends are expected to grow at a rate of 10 percent. Based on an assessment of the riskiness of the common stock, the investor's required rate of return is 15 percent. What is the value of this common stock?
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