Consider the following two interest options for an investment of $2000: (A) 6% simple interest. (B) 5% interest compounded annually. After how many years will option B outperform option A. The time it will take for option B to outperform option A is years.
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- You have $1000 to invest, and you have two options: Option A: 1.725% compounded semiannually Option B: 1.675% compounded continuously. (a) Calculate the annual percentage yield for each option. (Round your answers to three decimal places.) Option A Option B % Which is the better option? O Option A Option B (b) Calculate the future value of each investment after 2 years and after 5 years. (Round your answers to two decimal places.) Option A Option B Years 1034.94 1034.06 X X 2 1089.67 1087.35 X X Does your choice of option depend on the number of years you leave the money invested? YesYou are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate. Which option has a higher present value? Show the calculations of the present value for both options.You have $1000 to invest, and you have two options: Option A: 1.725% compounded semiannually Option B: 1.675% compounded continuously. (a) Calculate the annual percentage yield for each option. (Round your answers to three decimal places.) Option A 1.732 % 1.689 Option B % Which is the better option? O Option A Option B (b) Calculate the future value of each investment after 2 years and after 5 years. (Round your answers to two decimal places.) Years Option A Option B 1,034.94 1034.06 2 X X 1,087.35 1087.35 X X
- 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 $500 at the end of Year 6. If other investments of equal risk earn 6% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.Which of the following alternatives would you rather receive, assuming an interest rate of 8%per year, compounding annually?(You want to choose the option with the greatest monetary value) a. Receive 100 USD now b. Receive 120 USD in two years c. Receive 123 USD in three years d. Receive 125 USD in ten yearsConsider an investment that offers $4,000, $5,000 and $6,000 in the next 3 years, with the first payment occurring one year from now. The required return is 7%. What is the present value of this investment?
- An investment offers $6,800 per year for 20 years, with the first payment occurring one year from now. a. If the required return is 7 percent, what is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value today be if the payments occurred for 45 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value today be if the payments occurred for 70 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value today be if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value b. Present value C. Present value d. Present valueYou have a choice between receiving $550 now or $570 in six months' time. Current interest rates are 10% p.a. (simple interest). a) As a rational investor, which option would you choose, and why? b) Calculate the minimum interest rate p.a. that would reverse your choice above.An investment will pay $150 at the end of each of the next 3 years, $300 at the end of Year 4, $600 at the end of Year 5, and incur a $500 cost at the end of Year 6. If other investments of equal risk earn 6.7% annually, what is this investment’s present value? Its future value?
- An investment offers $8800 per year for 14 years with the first payment occuring one year from now. Assume the required returnis 12 percent. a. What is the value of investment today? b. What would the value be if the payment occured for 39 years? c. What would the value be if teh payments occured for 74 years? d. What would the value be if the payments occured forever?An investment offers $9,200 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 12 percent. a. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be if the payments occurred for 42 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the value be if the payments occurred for 77 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What would the value be if the payments occurred forever? (Do not roundAn 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 $500 at the end of Year 6. If other investments of equal risk earn 8 percent annually, what is its present value? Its future value?