You own two investments, A and B, that have a combined total value of $34,300.00. Investment A is expected to pay $860.00 per year forever; its next paymentis expected in 1 year, and its expected return is 6.09 percent per year. Investment B is also expected to make annual payments forever and make its next payment in 1 year. Investment B's next payment is expected to be $961.00 and all subsequent payments are expected to grow by 0.58 percent per year forever. What is the annual expected return for investment B? O 5.34% (plus or minus 3 bps) O 3.38 % ( plus or minus 3 bps) O 4.76% (plus or minus 3 bps) O 2.80% (plus or minus 3 bps) O none of the answers are within 3 bps of the correct answer

You own two investments, A and B, that have a combined total value of $34,300.00. Investment A is expected to pay $860.00 per year forever; its next paymentis expected in 1 year, and its expected return is 6.09 percent per year. Investment B is also expected to make annual payments forever and make its next payment in 1 year. Investment B's next payment is expected to be $961.00 and all subsequent payments are expected to grow by 0.58 percent per year forever. What is the annual expected return for investment B? O 5.34% (plus or minus 3 bps) O 3.38 % ( plus or minus 3 bps) O 4.76% (plus or minus 3 bps) O 2.80% (plus or minus 3 bps) O none of the answers are within 3 bps of the correct answer

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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Similar questions

Jesscia bailey currently has $6,300 in her 401K retirement account. She will contribute $200 a month into the account, earning 7.4% annual return, compounded monthly. If she does this for 32 years what is the value of the investment account in today's. Make sure to Assume that the average rate of inflation is 1.1%.
Ralph has an investment worth $264,289.32. The investment will make a special payment of X to Ralph in 2 years from today. The investment also will make regular, fixed annual payments of $67,000.00 to Ralph with the first of these payments made to Ralph in 1 year from today and the last of these annual payments made to Ralph in 5 years from today. The expected return for the investment is 11 percent per year. What is X, the amount of the special payment that will be made to Ralph in 2 years? O $16,664.22 (plus or minus 10 dollars) O $20,531.99 (plus or minus 10 dollars) O $12,184.74 (plus or minus 10 dollars) O $74,370.00 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answer
You are planning your retirement in 10 years. You currently have $161,000 in a bond account and $601,000 in a stock account. You plan to add $7,900 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 10.75 percent and the bond account will earn a return of 7.25 percent. When you retire, you plan to withdraw an equal amount for each of the next 24 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 6.5 percent. How much can you withdraw each year in your retirement? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Annual withdrawal amount $ 188,765.43
Mailee will pay out $6,000 at the end of year two and $8,000 at the end of year three. Then Mailee will receive $10,000 at the end of year four. With an interest rate of 10%, what is the net value of the payments versus receipts in today's dollars?
You are set to receive an annual payment of $11,000 per year for the next 16 years. Assume the interest rate is 5.9 percent. How much more are the payments worth if they are received at the beginning of the year rather than the end of the vear?
You are planning to save for retirement over the next 30 years. To do this, you will invest $1,300 a month in a stock account and $1,000 a month in a bond account. The return of the stock account is expected to be 10 percent, and the bond account will pay 5 percent. When you retire, you will combine your money into an account with a return of 7 percent. How much can you withdraw each month from your account assuming a 15-year withdrawal period? Multiple Choice $1,102,254.13 $34.571.73
Your uncle has agreed to deposit $3000 in your brokerage account at the beginning today for five years. You estimate that you can earn 9% per year on your investments. How much will you have in your account at the beginning of year 4?
To accumulate $85,000 in 6 years, you must invest $ now, to the nearest whole dollar value, if the interest rate is 9.7%, compounded annually.
You are expected to retire in 35 years from today. If you make an annual deposit of $20,500 at the end of each year into an investment account that pays 6.88% annually, how much money will your retirement account have at the end of 35 years if the interest in compounded.
Nick can invest $10,000 in either one of two annuities. Annuity A has a 6% annual interest rate and requires a starting principal of $9,000, plus annual $100 deposits for the next 10 years. Annuity B has a 12% annual interest rate and requires a starting principal of $9,000, plus annual $200 deposits for the next 5 years. What is the difference between the final balances of the two annuities?
What would you pay for an investment that pays you $30,000 at the beginning of each year for the next ten years? Assume that the relevant interest rate for this type of investment is 8%.
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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