What is the present value of $1,300 due in 14 years at a 7 percent interest rate and 12 percent interest rate? Do not round intermediate calculations. Round your answers to the nearest cent. Present value at 7%: $ Present value at 12%: $ Explain why the present value is lower when the interest rate is higher. I. The less interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. II. The more interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future III. The more interest you can earn during an investment period, the more you need to invest today to receive a particular amount in the futu

What is the present value of $1,300 due in 14 years at a 7 percent interest rate and 12 percent interest rate? Do not round intermediate calculations. Round your answers to the nearest cent. Present value at 7%: $ Present value at 12%: $ Explain why the present value is lower when the interest rate is higher. I. The less interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. II. The more interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future III. The more interest you can earn during an investment period, the more you need to invest today to receive a particular amount in the futu

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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Question 3) The following questions are related to Continuously Compounded Interest: If you invest $2,000 at an annual interest rate of 8% compounded continuously, calculate the final amount you will have in the account after 20 years. If you invest $10,000 at an annual interest rate of 5% compounded continuously, calculate the final amount you will have in the account after ten years. Question 4) Suppose you want to save $100,000 for a down payment on a house in 15 years. If your savings account earns 9% compounded monthly, how much would you need to deposit now to reach this goal?
Question 2. Your crazy banker presents another investment opportunity for 2022, where you are told that for the first six months of the year you will have an APR of r1 compounded monthly, and for the second half of the year the APR will be r2 compounded monthly. Assume that interest compounds on the 28th day of each month. The banker tells you that for the first six months of the year the effective annual rate is a1 = 6%, but they refuse to divulge the value of r1 directly. You choose to invest $1000 on January 1, 2022, and decide to withdraw all funds from the account on June 30, 2022. What was the value of your account upon withdrawal? The banker then informs you that for the last six months of the year the effective continuous rate is c2 = 4%. You decide that it would be nice to have exactly $2000 in this account on December 15, 2022. What amount of money do you need to invest in this account on July 1, 2022, in order to accomplish this goal?
9 Suppose you invested $500 in a local credit union and: f(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded quarterly. • g(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded monthly. h(t) gives the future value of the investment in f years, if the APR is 2% and interest is compounded continuously. a. Write a function rule for f(t). For g(t). For h(t). Then describe how the rules are similar and how they are different. b. Based on your understanding of exponential growth, describe how the graphs of f(t), g(t), and h(t) are similar, and how they are different. c. On the same coordinate grid, use algebraic reasoning to sketch graphs of the three functions. .
(3) Today you have paid $275 for an investment that pays $100 in one year, $500 in two years,and $X in 4 years. Assuming the market interest rate is 100% and the net present value of theinvestment is zero, what must be true about X?(a) X is greater than $2,500(b) X is greater than or equal to $2,000 but less than $2,500(c) X is greater than or equal to $1,500 but less than $2,000(d) X is greater than $1,200 but less than $1,500(e) X is less than or equal to $1,200
An investment offers to double your money in 30 months (don’t believe it). What rate per six months are you being offered? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Problem 1: You can choose between two different investments: (A) an annuity that pays $10,000 each year for the next 6 years; (B) a perpetuity that pays $10,000 forever, starting 11 years from now. 1. Which investment do you choose, A or B, if the interest rate is 5%? What if it is 10%? Explain in words the reason behind your choices.
Assume that you must estimate what the future value will be two years from today using the future value of 1 table. (PV of $1, EV of $1. PVA of $1, and FVA of $1) Which interest rate column and number-of-periods row do you use when working with the following rates? (Round percentage answers to 2 decimal places.) Answer is complete but not entirely correct. Number of Periods 1. 12% annual rate, compounded annually 2.8% annual rate, compounded semiannually 3. 12% annual rate, compounded quarterly 4. 12% annual rate, compounded monthly Interest Rate 12.00 2.00 3.00 1.00 % % % % 2 80 24
5. Present value To find the present value of a cash flow expected to be paid or received in the future, you will the future value cash flow by (1+1)N What is the value today of a $42, 000 cash flow expected to be received 17 years from now based on an annual interest rate of 7% ? $13,296 $10,637 $132, 670 $20, 609 Your broker called carfier today and offered you the opportunity to invest in a security. As a friend, he suggested that you compare the current, or present value, cost of the security and the discounted value of its expected future cash flows before deciding whether or not to invest. The decision rule that should be used to decide whether or not to invest should be. Everything else being equal, you should invest if the discounted value of the security's expected future cash flows is greater than or equal to the current cost of the security. Everything else being equal, you should invest if the current cost of the security is greater than the present value of the security's…
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Need help in letter d
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.)
nt Use the compound interest formulas A = P and A = Pert to solve the problem given. Round answers to the nearest cent. Find the accumulated value of an investment of $20,000 for 7 years at an interest rate of 4.5% if the money is a. compounded semiannually; b. compounded quarterly; c. compounded monthly; d. compounded continuously. a. What is the accumulated value if the money is compounded semiannually? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) b.What is the accumulated value if the money is compounded quarterly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) c. What is the accumulated value if the money is compounded monthly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) d. What is the accumulated value if the money is compounded continuously? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.)

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