Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Please show working Please answer a , b and c a. An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 9% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent. Present value: $ __________ Future value: $ ___________ b. Your parents will retire in 20 years. They currently have $340,000 saved, and they think they will need $1,250,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places. ___________ % c. If you deposit $2,000 in a bank account that pays 8% interest annually, how much will be in your account after 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardYou are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $24,900 at the end of this year and subsequent payments that will grow at a rate of 2.9 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity? (Round answer to 2 decimal places, e.g. 15.25.) Present value $ ?arrow_forwardYou invest $9000 in an account that pays simple interest of 2% for 13 years. What is the interest you will have at the end of the indicated period?arrow_forward
- An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $600 at the end of Year 6. A. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent. B. If other investments of equal risk earn 4% annually, what is its future value? Round your answer to the nearest cent.arrow_forwardConsider 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)arrow_forwardnt Use the compound interest formulas A = P and A = Pert to solve the problem given. Round answers to the nearest cent. Find the accumulated value of an investment of $20,000 for 7 years at an interest rate of 4.5% if the money is a. compounded semiannually; b. compounded quarterly; c. compounded monthly; d. compounded continuously. a. What is the accumulated value if the money is compounded semiannually? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) b.What is the accumulated value if the money is compounded quarterly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) c. What is the accumulated value if the money is compounded monthly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) d. What is the accumulated value if the money is compounded continuously? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.)arrow_forward
- 14. In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $10,000 and the interest rate is 10%, the borrower "pays" .10 × $10,000 = $1,000 immediately, thereby receiving net funds of $9,000 and repaying $10,000 in a year. a. What is the effective interest rate on this loan? (Round your answer to 2 decimal places.) b. If you call the discount d (for example, d = 10% using our numbers), express the effective annual rate on the loan as a function of d. c. Is the effective annual rate always greater than the stated rate d?arrow_forwardAn 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?$arrow_forwardAssume a selling price of $88,000, a down payment of $24,000, and a mortgage at 13% for 30 years. If the loan was for 25 years, what would be the difference in the total interest cost of the loan? (Round your answer to the nearest cent.)arrow_forward
- You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $15,000 at the end of this year and subsequent payments that will grow at a rate of 2.0 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity? (Round answer to 2 decimal places, e.g. 15.25.) Present value $arrow_forwardA property has a FMV of $7,500,000. If the property owner can only secure a loan with an LTV of 70%, a loan amortization of 30 years, and an interest rate of 8.125%, then a) What is the monthly payment for this loan? and b) What is the outstanding balance on the loan after eight years?arrow_forwardGCB has offered to grant you GHC50,000 loan with an annual interest of 24% compounded monthly to buy a house, What would be the monthly payment on the loan if the mortgage would be fully amortized in 20 years? b) Find the future and present value of a 5 year GHC1,000.00 annuity if the rate of interest is 12% and the first monthly payment is made now. c) Dividend of a share is forecasted to grow -6% next year, grow super-normally at 30% the next 3 years, and at a constant rate of 7.5% thereafter. What is the value of the stock in question if dividend paid this year is GHC4.50share and the required return is 13%. d) Calkulate the value of a 10-year, 10% S1,00.00 semisannual coupon bond if the prevailing market interest rate is 8%.arrow_forward
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