You are going to invest in a stock mutual fund with a front-end load of 5.5 percent and an expense ratio of 1.41 percent. You also can invest in a money market mutual fund with a return of 2.5 percent and an expense ratio of 0.40 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 10 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

You are going to invest in a stock mutual fund with a front-end load of 5.5 percent and an expense ratio of 1.41 percent. You also can invest in a money market mutual fund with a return of 2.5 percent and an expense ratio of 0.40 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 10 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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 have mutual funds with an effective APR of 10% and you want to be able to withdraw $3,000 from these mutual funds 4 times a year for 10 years. How much money would you need to have invested to start with?
You plan to start investing into an ETF (SPY) that tracks the S&P 500 index. You will invest $907 in 3 years and $1298 in 4years. If you expect to earn a return of 9.8%, how much will you have in 13 years? Answer:
You have just invested a one-time amount of $5,000 in a stock-based mutual fund. This fund should earn (on average) 9% per year over a long period of time. How much will your investment be worth in 35 years?
An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes these contributions at the end of the next 20 years, what is the present value of this investment today?
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $2.1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Five-year Twenty-year Market Value million million b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Five-year Twenty-year Face Value million million
You are 19 years old today. You want to have $381,507.06 in an investment account when you are 60 years old. You will start with an initial deposit in one year from now and grow it by 3% per year for a total of 15 investments. How much is the amount of that initial deposit? Assume an interest rate (a.k.a. return on your investment of 6%. Use the $ sign and a comma and round to the nearest thousand...(e.g. $8,000 would be the form of a correct answer). Hint..the correct answer should be very close to a multiple of $1,000. Previous Page Next Page Page 16 of 19
1. If you invest P8,000 at 6.6% interest, compounding monthly, how much will you have in 3½ years? 2. How much must you invest at 12% interest, compounding quarterly, in order to see your investment grow to P5,000 in 27 months? 3. If you invest P5,000 in a mutual fund extending a total annual return of 8% and you re-invest the proceeds each year, what will be the value of your investment after five years? 4. You deposited P1,000 in a savings account that pays 8% interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to Quezon City to become a call center agent rather than continue in school, so you close out your account. How much money will you receive? 5. What is the future value of a 5-year ordinary annuity with annual payments of P200, evaluated at a 7.5% semi-annual interest rate? 6. If P100 is placed in an account that requires a rate of return of 4%, compounded quarterly, what will it be worth…
if you invested $3,580 in a mutual fund and 14 years later it's worth $9,247, what annual rate of return did you earn on the investment
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $2.1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds.Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Market Value Five year: Twenty year: b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face Value Five year: Twenty year:
Suppose you invest $50 each month (starting today) into a mutual fund. You reinvest distributions. At the end of 5 years, you sell all your shares and receive $3,485. Calculate your rate of return.
You would like to start saving for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 13% per year over the past 80 years and is expected to continue at this rate. You decide to invest $2,000 at the end of each year for the next 30 years. Required: Calculate how much your accumulated investment is expected to be in 30 years.
The Maybe Pay Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $141,221 per year forever with the first payment coming in 9 years. Assume the required return on this investment is 12.16%. How much will you pay for the policy?

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