You must choose between two investments both maturing at the end of 5 years. For investment you will deposit R20,000 today at an annual interest rate of 8% for 5 years. Investment B requires you to make five end of year payments of R5,000. Investment B offers an annual interest rate of 9%. Which investment should you choose? a. Choose A, it will pay out R29,380 b. Choose A, it will pay out R117,340 c. Choose B, it will pay R 29,925 d. Choose B, it will pay R21,800

You must choose between two investments both maturing at the end of 5 years. For investment you will deposit R20,000 today at an annual interest rate of 8% for 5 years. Investment B requires you to make five end of year payments of R5,000. Investment B offers an annual interest rate of 9%. Which investment should you choose? a. Choose A, it will pay out R29,380 b. Choose A, it will pay out R117,340 c. Choose B, it will pay R 29,925 d. Choose B, it will pay R21,800

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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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.
You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years. If you pay $20,000 for the GIC today and receive no interest along the way, you will get __________ in 6 years (to the nearest dollar). (Round your answer to the nearest whole dollar).
A person has Php200,000.00 which he plan to put in an investment for 3 years. He is choosing between two investments. Investment A credits 5% interest compounded monthly, while investment B credits 5.3% interest compounded quarterly. Which investment is better?
A new investment opportunity for you is an annuity that pays $560 at the beginning of each year for 3 years. You could earn 5.4% on your money in other investments with equal risk. What is the most you should pay for the annuity? Group of answer choices $1,595.40 $1,756.86 $1,517.12 $1,442.76 $1,696.61
You have a chance to buy an annuity that pays $5,700 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should Dav for the annuity? a $15,378.22 b. $16,454.70 c. $11,687.45 d. $14,763.09 e. $13.532.83
2. Your parents are planning to give you a lump sum amount. They can give you P20,000 now, or P25,000 two years from now. If you can put your money in an investment that gives you a rate of return of 7% annually and computes interest semi- annually, which option would you choose? Explain.
You have just received a windfall from an investment you made in a friend's business. She will be paying you $26,016 at the end of this year, $52,032 at the end of next year, and $78,048 at the end of the year after that (three years from today). The interest rate is 11.4% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?
An investment promises to pay $7,000 at the end of each year for the next six years and $3,000 at the end of each year for years 7 through 10. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 15 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment?$ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 15 percent required rate of return?$
You have your choice of two investment accounts. Investment A is a 6-year annuity that features end-of-month $3,000 payments and has an interest rate of 8 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an interest rate of 10 percent, also good for 6 years. How much money would you need to invest in B today for it to be worth as much as Investment A 6 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value
An investor is considering an investment that will pay $2,170 at the end of each year for the next 10 years. He expects to earn a return of 12 percent on his investment, compounded annually. Required: a. How much should he pay today for the investment? b. How much should he pay if the investment returns are received at the beginning of each year? (For all requirements, do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) a. Present value of ordinary annuity b. Present value of annuity due
An investment promises to pay you $400 per year starting in 5 years. The cash flow from the investment is expected to increase by 2 percent per year forever. If alternative investments of similar risk earn a return of 9 percent per year, determine the maximum you would be willing to pay for the investment. (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.) Maximum amount you would be willing to pay $
Using the TVM calculator, compare the following if the investment pays 7%/a compound annually and payments are made until age 65. Calculate the future value of each investment and the total amount paid in. which would you choose? a) depositing $1500 every year starting at age 20. b) depositing $4500 every year starting at age 50.

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