You are thinking about investing $4,619 in your friend's landscaping business. Even though you know the investmentis risky and you can't be sure, you expect your investment to be worth $5,794 next year. You notice that the ratefor one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscapebusiness offer an expected return of 11% for the year. What should you do?The present value of the return is $(Round to the nearest cent.)

$5,220.00Explanation:You may use the following formula to solve this problem:Present Value = Future…

Answered: You are thinking about investing $4,619…

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

See similar textbooks

Similar questions

You’re trying to choose between two different investments, both of which will cost $65,000 today. Investment A will give you $125,000 in 6 years and Investment B will give you $205,000 in 10 years. Which of the two investments should you choose? Why? How will your answer change, if any, if interest rates are expected to increase over the next 10 years. (Explain using the appropriate equations and show all work)
Reference Present Value of $1 12% 14% 16% 18% 20% Periods 1% 2% 3% 4% Period 1 0.990 0.980 0.971 0.962 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 5% 6% 8% 10% 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.826 0.797 0.769 0.743 0.718 0.694 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 Period 11…
Mr. Saso is planning to take a loan of $5 million to be repaid over 10 years. He is contemplating different strategies and decides to borrow $500,000 at 3% interest rate this year and then renew the loan annually. What has Mr. Saso’s strategy achieved? Question 12 options: The strategy eliminates both credit risk and repricing risk The strategy eliminates credit risk but not repricing risk The strategy leaves Mr. Saso exposed to both credit risk and repricing risk The strategy eliminates repricing risk but not credit risk
What is the excel function and formula for this question? Off-The-Books Investment Firm, LLC, has offered you an investment it says will return to you $20,000 in 2 years. To get in, you'll need to make a $10,000 deposit to their receivables account and promise not to tell anyone about it. What is the annual return on this investment?
Elon Musk asks you to invest $10M in his new cyber scooter product. He promises that he will return $15M to you at the end of the next 5 years. On the other hand, your good friend and hedge fund manager Jim Simons wants you to invest in his new fixed income fund. Jim promises that your money with $10M will be continuously compounded over the next 5 years. At what interest rate would Jim's offer be better than that of Elon's?
Economics Your friend is inviting you to this exciting investment opportunity. To get in it costs 10,000 today but you will get 10,500 at the end of the year. a) What is the Internal Rate or Return of the investment opportunity? b) Suppose that the risk-free government bond rate is 5 percent. Should you still invest with your friend?
An investor has an opportunity to invest in a rental property that willprovide net cash returns of $400 per year for three years. The investor believes that an annual return of 10 percent should be earned on this investment. How much should the investor pay for the rental property?
Suppose you are committed to owning a $346,000 Ferrari. If you believe your mutual fund can achieve an annual rate of return of 11.0 percent and you want to buy the car in 9 years (on the day you turn 30), how much must you invest today?
(Related to Checkpoint 5.6) (Solving for ) You are considering investing in a security that will pay you $3,000 in 34 years. a. If the appropriate discount rate is 8 percent, what is the present value of this investment? b. Assume these investments sell for $773 in return for which you receive $3,000 in 34 years. What is the rate of return investors earn on this investment if they buy it for $773? a. If the appropriate discount rate is 8 percent, the present value of this investment is $ 219.13. (Round to the nearest cent.) b. The rate of return investors can earn on this investment if they buy it for $773 is %. (Round to two decimal places.)
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?
(Use Calulator or Formula Approach) You are offered an investment that will pay you $200 in one year, $400 the next year, $600 the next year and $800 at the end of the fourth year. You can earn 12 percent on very similar investments. What is the most you should pay for this one?
Answer the following questions in full sentences and clearly. Be sure to have answered with an explanation and answer each question separately. Question 1: Is long term financial planning worth the short term sacrifices? Question 2A: Would you rather receive a check for $1,000 today or $1,300 in 5 years from now? Explain. Question 2B: Which option would more likely yield you more money in five years? Question 2C: Why might it be hard for many of us to be able to think that far ahead into the future?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

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…

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

SEE MORE TEXTBOOKS