Managerial Economics (MindTap Course List)
4th Edition
ISBN: 9781305259331
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 5, Problem 5.2IP
To determine
The profitability of the given investment.
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Suppose that $500 is invested at the end of every year for 5 years. The polynomial
function that models the value of the investment is
P(x) = 500x5 + 500x4 + 500x³ + 500x² + 500x, where x
represents the effective interest rate plus 100%. One year after the last payment, the
investment is worth $3200. Find the effective interest rate one year after the last
payment, to the nearest tenth. (Note: You will need to subtract 1 from the value of x
to find the effective interest rate.)
Adam buys a two-year bond with a $1000 face value and a 10% coupon rate for $1000 today. If one year later the market interest rate increases by 6% and Adam sells the bond, then his rate of return on this investment is _______% (round to one decimal place, negative if it is a loss)
Suppose you want to realize a future value of $150,000 in 30 years on an investment you make. The average annual rate of
return is 8.75%. What will be the present value of your investment?
Chapter 5 Solutions
Managerial Economics (MindTap Course List)
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