Chapter 12, Problem 11QP

A young computer engineer has $12,000 to invest and three different investment options (funds) to choose from. Type 1 guaranteed investment funds offer an expected rate of return of 7%, Type 2 mixed funds (part is guaranteed capital) have an expected rate of return of 8%, while an investment on the Stock Exchange involves an expected rate of return of 12%, but without guaranteed investment capital. Computer engineer has decided not to invest more than $2,000 on the Stock Exchange in order to minimize the risk. Moreover for tax reasons, she needs to invest at least three times more in guaranteed investment funds than in mixed funds. Assume that at the end of the year the returns are those expected; she is trying to determine the optimum investment amounts. (a) Express this problem as a linear programming model with two decision variables.(b) Solve the problem with the graphical solution procedure and define the optimum solution.

Jerry takes out a mortgage at 5.2%. After a few years, his payment increases and he sees that the interest rate of his mortgage is now 6.1%. Which of these mortgage types does Jerry most likely have? ARM loan home equity loan fixed-rate loan package mortgage

An annuity pays $25,000 semiannually (every 6 months) for 12 years. An alternative investment’s APR is 10% with quarterly compounding. What is the value of this annuity?

Your answer is partially correct. An independent contractor for a transportation company needs to determine whether she should upgrade the vehicle she currently owns or trade her vehicle in to lease a new vehicle. If she keeps her vehicle, she will need to invest in immediate upgrades that cost $5,200 and it will cost $1,300 per year to operate at the end of year that follows. She will keep the vehicle for 5 years; at the end of this period, the upgraded vehicle will have a salvage value of $3,800. Alternatively, she could trade in her vehicle to lease a new vehicle. She estimates that her current vehicle has a trade-in value of $9,800 and that there will be $4,100 due at lease signing. She further estimates that it will cost $2,900 per year to lease and operate the vehicle. The independent contractor's MARR is 11%. Compute the EUAC of both the upgrade and lease alternatives using the insider perspective. Click here to access the TVM Factor Table Calculator. 1943.56 EUAC(keep): $…

Suppose that machinery used by a bank for sorting and clearing cheques breaks down. This is a manifestation of: Select one: a. Liquidity Risk b. Operational Risk c. Credit Risk d. Insolvency Risk

Within the context of insurance companies, risk management mainly focuses on: Select one: a. Ensuring premiums invested yield planned rate of return b. Reducing the high frequency of insurance claims c. Loss prevention and mitigation d. Prevent underwriting risk

At age 25, Anthony establishes an Individual Retirement Account (IRA). If he invests P10,000 per year for 30 years in an ordinary annuity, the account earns 7.75% per year, how much will he have in the account at age 55?

Weismann Company issued 18-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price?

Cost benefit analysis is a complex approach that considers the cash flows or the value of money over a period of time. True or False