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
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
icon
Related questions
Question
Qno5 need only fast
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?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Investments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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