Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Calculate the
future value in five years of $5,000 received today if your investments pay. - 6 percent compounded annually
- 8 percent compounded annually
- 10 percent compounded annually
- 10 percent compounded semiannually
- 10 percent compounded quarterly
What do your answers to these questions tell you about the relation between future values and interest rates and between future values and the number of compounding periods per year?
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- Find the present value of an investment if it is expected to provide annual earnings of $20,000 for 10 years and to have a resale value of $50,000 at the end of that period. Assume a 8% rate and earnings at year end. The present value of 1 at 8% for 10 periods is .46319. The present value of an ordinary annuity at 8% for 10 periods is 6.71008. The future value of 1 at 8% for 10 periods is 2.15892.arrow_forwardGiven the following information, calculate the rate of return. price = $501.88time to maturity = 10 yearsannual payment = $100type = ordinary annuityarrow_forwardWhat is the future value of $750.00 received today and deposited at 8% per year for 10 years with interest compounded semi-annually?arrow_forward
- What is the future value of an annuity with annual cashflows of $4,000 for 38 years? The interest rate is 3.2%. Round to the nearest dollar.arrow_forwardYou have a choice of investing in a financial instrument that either compounds interest on an annual basis or on a quarterly basis. Which would you choose? Group of answer choices I would prefer simple interest Quarterly compounding I would be indifferent; I would earn the same with either compounding. Annual compoundingarrow_forwardSuppose we invest £100,000 at a semi-annually compounded interest rate of 6% for 1 year. What are the gross and net returns? Do the same if this was a monthly compounded rate and a continuously compounded rate. Compare the three net returns to the interest rate. Can you explain the ordering of these 4 quantities?arrow_forward
- Calculate the future value in five years of $4,000 received today if your investments pay for the following interest rates. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) 6 percent compounded annually b. 8 percent compounded annually a. C. 10 percent compounded annually d. 10 percent compounded semiannually 10 percent compounded quarterly e. Future Valuearrow_forwardWhat is the future value of $775 deposited for one year earning an 8 percent interest rate annually? Note: Do not round intermediate calculations. Enter your answer as a whole number. Future valuearrow_forwardDerive an equation to find the end-of-year future sum F that is equivalent to a series of n beginning-of-year payments B at interest rate i. Then use the equation to determine the future sum F equivalent to six B payments of $100 at 8% interest.arrow_forward
- What is the future value of $117,000 invested for 5 years at 14% compounded monthly? (a) State the type. present value future value amortization ordinary annuity sinking fund (b) Answer the question. (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_forwardSuppose that you have inherited an annuity with the parameters given below. What is the present value of this annuity? Round your final answer to two decimals First payment: First payment occurs: Constant payment growth rate: Payment frequency: Cost of Capital: Term: Present value 424.00 2 years from now 1% Annually Annual 8% Annually 18 Yearsarrow_forward
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