Consider an investment that pays off $7,000 or $15,000 per $10,000 invested with equal probability. Suppose you have $10,000 but are willing to borrow to increase your expected return. What would happen to the expected value and standard deviation of the investment i you borrowed an additional $10,000 and invested a total of $20,000? What if you borrowed $20,000 to invest a total of $30,000?
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- Consider 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 TripledAssume that you have two investment alternatives: the first project produces $125 for sure, and the second project produces $150 with probability 2/5. You can borrow $110 from your financial institution for one project (investment) if you show an asset as a collateral. Suppose that you maximize your expected profit, what would be the minimum level of collateral that make you select the safe project?ou invest $1000at time t=0 and an additional $5000 at time t=1/2. At time t=1/2 you have $1300 in your account and at time t=1 you have $6100 in your account. Find the dollar-weighted rate of return rd and the time-weighted rate of return rt on this investment.
- Problem 05-15 (algo) Consider an investment that pays off $800 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: Fill in the table below to answer the questions above. Enter your responses as whole numbers and enter percentage values as percentages not decimals (i.e., 20% not 0.20). Enter a negative sign (-) to indicate a negative number if necessary. Expected Value Percent Increase Standard Deviation $ 1100 Invest $1,000 Invest $2,000 $ 2200 X 3300 $ Invest $3,000 X 10 20 30 300 600 900 Expected Return N/A Doubled TripledWhat would be the interest rate that would allow you to convert an investment from B/.5,000 to B/.20,227.79 in 10 years? (NOTE: Do this problem ONLY with Conversion Factor and the corresponding Excel Financial Function and remember to confirm your answer with the corresponding Cash Flow Table)You invest $5000 at time t=0 and an additional $2000 at time t=1/2. At time t=1/2 you have $5300 in your account and at time t=1 you have $7300 in your account. Find the dollar-weighted rate of return rd and the time-weighted rate of return rt on this investment.A. rd= 2.86 %, rt=3.43 %B. rd= 2 %, rt=2.4 %C. rd= 6.26 %, rt=7.5 %D. rd= 2.51 %, rt=3 %E. rd= 5.01 %, rt= 6 % Please answer it only correct without using Excel
- You have $5000 to invest for 1 year. Fund A has an estimated 4% annual return, and Fund B has an estimated 10% annual return. Fund A is more stable, and preferred among investors with low risk tolerance. Fund B is less stable, but has larger returns. Answer the following questions about this investment opportunity. 1. Suppose you have a low risk-tolerance, and you invest everything in Fund A. How much do you expect to make on your investment?Round to the nearest cent. 2. Suppose you have a medium risk-tolerance, and you want an annual return of $355. You decide to invest part in Fund A and the rest in Fund B. How much do you need to invest in Fund A?Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all workyou are considered an investment with the following cash flows. If the required rate of return for that investment is 13.5% should you accept it based solely on the internal rate of return Year. Cash flows 1. -$12000 2. $5500 3. $8000 4. -$1500 A. yes, because the IRR exceeds the required return B. yes, because the IRR is a positive rate of return C. No, because the IRR is less than the required return D. you cannot apply the IRR rule in this case because there are multiple IRRs.
- Please answer both of the question. Exercise No. 1 Suppose they offer us an investment project in which we have to invest $5,000.00 and they promise us that after that investment we will receive $2,000.00 the first year and $4,000.00 the second year. Calculate internal rate of returnExercise No. 2 Suppose they offer us an investment project in which we have to invest $5,000.00 and they promise us that after that investment we will receive $1,000.00 the first year, $2,000.00 the second year, $1,500.00 the third year and $3,000.00 the fourth year. Calculate internal rate of returnTrestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.You have an opportunity to make an investment that will pay $100 at the end of year 1, $400 at the end of year 2, $400 at the end of year 3, $400 at the end of year 4 and $300 at the end of year 5. Find the present value of this cash flow stream if the interest rate is 8%. (Hint: You can simply discount each cash flow to the present and then add them up or use the "=NPV function" in Excel or the CF key on your financial calculator a. $1,251.25 b. $1,351.25 c. $1,151.25 d. $1,451.25 a.. b.. C. . d..