You are thinking about investing $4,558 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,780 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? The present value of the return is $ (Round to the nearest cent.) You should (Select from the drop-down menu.) invest in the business not invest in the business

You are thinking about investing $4,558 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,780 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? The present value of the return is $ (Round to the nearest cent.) You should (Select from the drop-down menu.) invest in the business not invest in the business

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 are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to withdraw $220,000 per year for the next 30 years (based on family history, you think you will live to age 70). You plan to save by making 20 equal annual installments (from age 20 to age 40) into a fairly risky investment fund that you expect will earn 12% per year. You will leave the money in this fund until it is completely depleted when you are 70 years old. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) Read the requirements. Requirement 1. How much money must you accumulate by retirement to make your plan work? (Hint: Find the present value of the $220,000 withdrawals.) (Round your final answer to the nearest whole dollar.) To make the plan work, you must…
You are thinking about investing $4,692 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,738 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 8% for the year. What should you do?.
David Rubin has $100,000 to invest over 5 years. David is very risk-averse and has a target average return of 4% per year for his investment over the next 5 years. He is looking at investing his money in the 3-month US Treasury Bill, which currently yields 4% per year. What are the pros and cons of David investing in this 3-month T-Bill in the context of his risk-proflle and his investment objective? If a company's beta were to double, would its expected rate of return double? Explain your answer. Using the five components of a nominal interest rate, explain why a US corporate bond's yield-to- maturity (YTM) is always greater than the YTM of a US Treasury bond of similar maturity.
Mr. New Retiree is about to retire after an illustrious career in the Zambian civil service. He is expecting to receive a net of K2.5 million in retirement benefits. As an Investment Advisor, you have been approached by Mr. New Retiree to advise on the options available for him to consider. Advise on the main asset classes available in Zambia clearly showing the common investment time horizon for each. What is the most money you could make over the next year?
Based on the framework in the previous two problems, you have found that you need to have a total of $1,529,499 in savings at the time you retire, in 40 years. You currently only have $28,118 saved up in your retirement accounts. If you anticipate that your 80/20 investment portfolio will return an average of 8.31% per year, how much extra must you save every year to reach your goal? Assume that you'll be saving the extra amount by the end of each year.
You want to save for retirement. Assuming you are now 20 years old and you want to retire at age 60, you have 40 years to watch your investment grow. You decide to invest in the stock market, which has earned about 8% per year over the past 80 years and is expected to continue at this rate. You decide to invest $2,000 today.
A potential client comes to you and asks you to help him pick some stocks and that we wants his investments to earn at least 10% guaranteed annually. He also doesn’t understand why you want him to invest in a variety of asset classes. How would you explain the importance of diversification to him and what would you say in response to his request for a 10% guaranteed annual return on his investment?
You are thinking about investing $4,953 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,650 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? The present value of the return is $ (Round to the nearest cent.)
Suppose you bought a condo for $100,000 financing it with a $20,000 down payment of your own funds and an $80,000 mortgage loan from a bank. Assume that the market value of your condo has now risen to $120,000. Ignoring interest and other costs, and assuming the loan amount is still $80,000, calculate your rate of return on your asset (ROA) and your rate of return on equity (ROE).
Suppose that you invest $50,000 into a downpayment on a $250,000 house, which has a price appreciation of 3% per year. Your mortgage is fixed at $ 36,000 per year, and your tenants pay you $24,000 per year. Property taxes, maintenance, and other expenses cost $5,000 per year. Suppose that after 25 years, you sell your property. Would it have been better to invest $ 50,000 in the stock market, assuming it has returns of 9% per year over the same time period (25 years)? Why? Show your calculations and justify your answer. For the purposes of this question, suppose that inflation is zero.
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $856 in 6 years. If your required return on investments of this risk is 21.75, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
The amount the bank is willing to loan you to start your business is not enough to cover the initial investment you need to make. You need an additional $10,000. You approach an investor and ask him to invest $10,000 in your business. In return, you offer to pay him $500 out of your profits at the end of years 1-4 and an amount X at the end of year 5. The investor's annual cost of funds is 10%. How big must X be to induce him to invest in your business?

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