You invest $500 today and an additional investment of $500 three years from today. You expect to receive the following cash flows: End of Year 1 $200 End of Year 2 $400 End of Year 3 $500 End of Year 4 $600 10. Refer to the cash flows above. If you assume a discount rate of 3% EAR, how much does the value today of the benefits exceed the value today of the costs? $604 11. Refer to the cash flows above. What is the return on your investment? 40.4%
You invest $500 today and an additional investment of $500 three years from today. You expect to receive the following cash flows: End of Year 1 $200 End of Year 2 $400 End of Year 3 $500 End of Year 4 $600 10. Refer to the cash flows above. If you assume a discount rate of 3% EAR, how much does the value today of the benefits exceed the value today of the costs? $604 11. Refer to the cash flows above. What is the return on your investment? 40.4%
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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For number 11, I keep getting the answer to be 64%. Why is it 40%? This doesn't make any sense to me
Transcribed Image Text:You invest $500 today and an additional investment of $500 three years from today. You
expect to receive the following cash flows:
End of Year 1 $200
End of Year 2 $400
End of Year 3 $500
End of Year 4 $600
10. Refer to the cash flows above. If you assume a discount rate of 3% EAR, how much does
the value today of the benefits exceed the value today of the costs?
$604
11. Refer to the cash flows above. What is the return on your investment?
40.4%
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