Assume you lend someone $1 million a year for the next 10 years, and they tell you they will give you $2 million a year for the following 10 years. a) if the interest rate for the next 20 years is expected to be 6% should you take this deal? b) the expected inflation rate is 3% per year over the next 20 years. Based on this info, show exsctly how your calculations changes and explain why?

Assume you lend someone $1 million a year for the next 10 years, and they tell you they will give you $2 million a year for the following 10 years. a) if the interest rate for the next 20 years is expected to be 6% should you take this deal? b) the expected inflation rate is 3% per year over the next 20 years. Based on this info, show exsctly how your calculations changes and explain why?

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

See similar textbooks

Similar questions

In order to fund your retirement, deposit of RM X can be made into an account today. This retirement plan wishes to pay RM100, in real terms, for 15 years, with first payment occurring 6 years from now. The inflation rate would be 0.0% for the next 5 years and 1.5% per annum thereafter. The annual effective rate of return is 6.8%. Calculate X. Please explain in details and state what formula did use on how to solve the problem
You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.a) Explain the time value of money principleb) Identify the underlying assumption of the time value of money principlec) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.d) Suggest how you can minimize the amount of cash you must invest in order to reach your retirement goal.e) Compute the amount you will have at the end of the 45 years.f) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.
a) You invest 155 000 TL for a year. At the end the year, you have 174 375 TL net in your account. If the inflation realizes at %10 fot this year, calculate real rate of return? Can real interest rates be negative? Give a simple example?
Suppose you wish to have $18500 in 5 years. use the present value formula to find out how much you should invest now at 9% interest, compounded semiannually, in order to have $18,500, 5 years from now. Then calculate the interest. The possible answers are: a. 6587.34 b. 8325.00 c. 10175.00 d. 11912.66 I understand how to do the present value formula but after that I don't understand how to calculate the interest, please help!
You deposit $2X today, $3X one year from now and $3X two years from now. If there are different annual compounding interest rates per period as shown in the diagram below and if you had $19803 at the end of year 3, what is the value of X?
Consider an investment which pays $3,000 at the end of year 1, year 2, and year 3. In year4, the investment will pay $4,000 and this payment will grow by 2% each year forever. If theappropriate interest rate is 9%, what is this investment worth today? (Show Using BA II Plus or By Hand)
An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?
You invest $1,400 today and expect to sell your investment for $3,200 in 10 years. a-1. Calculate the present value of the future payoff, if the interest rate is 8%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2. Is this a good deal? b-1. Calculate the present value, if the interest rate is 11%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-2. Is this a good deal?
1. If you receive $176 each month for 12 months and the discount rate is 0.04, what is the future value? (show the process and can use financial calculator)
1)If you invest $150 monthly in an individual retirement account (IRA) for a decade with a monthly compound interest rate of 1%. What will be the return after ten years? Please draw the cash flow diagram and use Excel macro to find the answer. 2)If the interest rate drops to .5% per month, what will be the amount of money you need to invest every month to get the same return in (1), but at the end of five years? Please use Excel macro to find the answer.
1. If you receive $29 each quarter for 19 years and the discount rate is 0.05, what is the present value? (show the process and can use financial calculator)
Suppose you estimate that the effective rate of return (EAR) you can generate from your investment is 7%. You are planning to invest $20000 of monthly investment per month for another 10 years, starting one from from now (first investment payment will be made in a month). You are wondering how much your retirement fund will become in 10 years. Which of the following can help you figure out the problem? A) = FV(0.07, 10, 0, 30000000,0,0) B) = FV(0.07,10, 30000000,0,0) C) = FV((1.07^(1/12)-1, 120, 0, 30000000, 0) D) = FV((1.07^(1/12)-1, 120, 0, 30000000, 1) E) = FV((1.07^(1/12)-1, 120, 30000000,0,1)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS