Suppose you found an investment that earns 6.0% each year.Suppose you want to withdraw 11,000 dollars in one year.Suppose you also want to withdraw 24,000 dollars in four years.How many dollars should you invest today?A Between 25,000 and 27,400B Between 27,400 and 28,200C Between 28,200 and 29,100D Between 29,100 and 32,000

Present value is the value of future cashflow at todays date discounted at specified rate. formula:…

Answered: Suppose you found an investment that…

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're trying to choose between two different investments, both of which have up-front costs of $25,000. Investment G returns $60,000 in six years. Investment H returns $92,000 in nine years. Calculate the rate of return for each these investments. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Investment G Investment H % %
Suppose that you have 12, 000 in a rather risky investment recommended by your financial advisor. During the first year, your investment decreases by 40% of its original value. During the second year, your investment at the end of year one increases by 50%. Your advisor tells you that there must have been a 10% overall increase of your original $12, 000 investment. Is your financial advisor using percentages properly? If not, what is your actual percent gain or loss of your original $12, 000 investment?
You are considering an investment in a clothes distributer. The company needs $106,000 today and expects to repay you $124,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 15%. What does the IRR rule say about whether you should invest? What is the IRR of this investment opportunity? The IRR of this investment opportunity is %. (Round to two decimal places.)
Double your money-Rule of 72. Approximately how long will it take to double your money if you get an annual return of 4.6%, 7.1%, or 10 4% on your investment? Approximately how long will it take to double your money if you get a 4.6% annual return on your investment? years (Round to two decimal places.)
Consider two investments: Invest $1,000 and receive $110 at the end of each month for the next 10 months Invest $1,200 and receive $130 at the end of each month for the next 10 months If this were your money, and you want to earn at least 12% interest on your money, which investment would you make, if any? Solve the problem by annual cash flow analysis.
Find the required value for each problem. Show the formula used and the counts for each problem. 6. How much more would you earn in three years if you invest $ 10,000 at a compound annual interest rate of 5.75%, instead of at a simple interest rate of 5.75%? 7. What would be the compound annual interest rate you would need to double your investment of $ 1,000 in three years? 8. If your bank pays you 5% annual interest, compounded monthly, how much would you have in ten years if you invest $ 1,000 today? 9. How much would you have to deposit today in a bank account that pays 9.25% annual interest, compounded quarterly, if you expect to have $20,000 at the end of five years? 10. Suppose you invested $ 2,500 in the business that a friend opened and in three years this friend returned $ 3,700 to you. How much was the return on your investment in your friend's business?
6. You are considering an investment that will pay you $1,000 in one year, $2,mm in two years, and $3,000 in three years. If you want to earn 10% on yourmoney, how much would you be willing to pay?
You’re trying to choose between two different investments, both of which have upfront costs of K75,000. Investment G returns K135,000 in six years. Investment H returns K195,000 in 10 years. Which of these investments has the higher return?
Assume you invest $5,100 today in an investment that promises to return $6,928 in exactly 10 years. a. Use the present-value technique to estimate the IRR on this investment. b. If a minimum annual return of 9% is required, would you recommend this investment? #69 Part 1 a. The IRR of the investment is enter your response here%. (Round to the nearest whole percent.) Part 2 b. If a minimum return of 9% is required, would you recommend this investment? (Select the best choice below.) A. No, because this investment yields less than the minimum required return of 9%. B. Yes, because a minimum required return of 9% does not compensate for an investment that lasts longer than one year. C. No, because a minimum required return of 9% is an arbitrary choice for an investment of this risk level. D. Yes, because this investment yields more than the minimum required return of 9%
man.5
Double your money—Rule of 72. Approximately how long will it take to double your money if you get an annual return of 3.6%, 6.3%, or 9.1% on your investment?
You have an opportunity to make an investment that will pay $ 300 at the end of the first year, $ 100 at the end of the second year, $ 200 at the end of the third year, $ 400 at the end of the fourth year, and $500 at the end of the fifth year. a. Find the present value if the interest rate is 9 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the =NPV function in Excel or to use your CF key on a financial calculator —but you'll want to check your calculator's manual before you use this key. Keep in mind that with the =NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF0 is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF0 =0.) b. What would happen to the…

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