Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- (Related to Checkpoint 5.6) (Solving for ) You are considering investing in a security that will pay you $3,000 in 34 years. a. If the appropriate discount rate is 8 percent, what is the present value of this investment? b. Assume these investments sell for $773 in return for which you receive $3,000 in 34 years. What is the rate of return investors earn on this investment if they buy it for $773? a. If the appropriate discount rate is 8 percent, the present value of this investment is $ 219.13. (Round to the nearest cent.) b. The rate of return investors can earn on this investment if they buy it for $773 is %. (Round to two decimal places.)arrow_forwardUsing the previous table, enter the correct factor for three periods at 5%: Future value x Factor = Present value $8,000 x = $6,912 You may want to own a home one day. If you are 20 years old and plan on buying a $200,000 house when you turn 30, how much will you have to invest today, assuming your investment yields an 8% annual return? $fill in the blank 8f0fa5fb3029fb7_2 USE SNIPPET TO ANSWERarrow_forward(Use Calulator or Formula Approach) You are offered an investment that will pay you $200 in one year, $400 the next year, $600 the next year and $800 at the end of the fourth year. You can earn 12 percent on very similar investments. What is the most you should pay for this one?arrow_forward
- To get the answer Step 1 plug everything using n=30 and you will have 0 for fv. Solve for pv Step 2 n= 2 and wte u got for pv in stdp 1 will go into fv. Pmt will be 0. Solve for pvarrow_forwardSuppose you invest $1000 and two years later you cash out for $1300. Your internal rate of return is closest to?: 12% 14% 15% 30%arrow_forwardJulie wants to borrow $10,250 from you. She has offered to pay you back $12,250 in a year. If the cost of capital of this investment opportunity is 12%, what is its NPV? Question content area bottom Part 1 The NPV of the investment is $enter your response here. (Round to the nearest cent.)arrow_forward
- Find the required value for each problem. Show the formula used and the counts for each problem. 6. How much more would you earn in three years if you invest $ 10,000 at a compound annual interest rate of 5.75%, instead of at a simple interest rate of 5.75%? 7. What would be the compound annual interest rate you would need to double your investment of $ 1,000 in three years? 8. If your bank pays you 5% annual interest, compounded monthly, how much would you have in ten years if you invest $ 1,000 today? 9. How much would you have to deposit today in a bank account that pays 9.25% annual interest, compounded quarterly, if you expect to have $20,000 at the end of five years? 10. Suppose you invested $ 2,500 in the business that a friend opened and in three years this friend returned $ 3,700 to you. How much was the return on your investment in your friend's business?arrow_forward6. You are considering an investment that will pay you $1,000 in one year, $2,mm in two years, and $3,000 in three years. If you want to earn 10% on yourmoney, how much would you be willing to pay?arrow_forwardPlease show by formula not excel and both parts, it is one question only or skip.arrow_forward
- 4. You are thinking of buying house for $70,000. The house will be worth $100,000 in five years. A. Should you buy the lot if r = 0.05? (r= interest rate a bank would pay you) B. Should you buy it if r = 0.10? (r= interest rate a bank would pay you)arrow_forwardConsider an investment that pays off $700 or $1,400 per $1,000 invested with equal probability. Suppose you have $1,000 but are willing to borrow to increase your expected return. What would happen to the expected value and standard deviation of the investment if you borrowed an additional $1,000 and invested a total of $2,000? What if you borrowed $2,000 to invest a total of $3,000? Instructions: Complete the table below to answer the questions above. Enter your responses as whole numbers and enter percentage values as percentages not decimals (i.e., 23% not 0.23). Enter a negative sign (-) to indicate a negative number if necessary. Invest $1,000 Invest $2,000 Invest $3,000 Expected Value $ 1050 1200 $ $ 1300 Percentage 20 % 30 % 40 % Standard Deviation 300 600 900 Expected Return N/A Doubled Tripledarrow_forwardPls help me stepwise. Thankssarrow_forward
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