Question 2. (- ...) Your investments provide you a nominal rate of return of 9.25%. Inflation is currently running at 4.25% and is expected to be at this level for the foreseeable future. If you invest $25,000 today, how much stuff in rcal terms (today's prices) will you be able to purchase in 15 ycars?
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- 4. You are planning to invest OMR 2,500 today for three years at a nominal interest rate of 9 percent with annual compounding. a) What would be the future value of your investment? b) Now assume that inflation is expected to be 3 percent per year over the same three-year period.What would be the investment’s future value in terms of purchasing power? c) What would be the investment’s future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?2 a) Suppose you receive $10,000 and have an opportunity to earn a real rate of return of 10% (assume known and constant forever). Using the definition of income proposed by John Hicks, what is your annual sustainable income? In other words, what amount can you spend every year forever? b) What is the present value of an annual payment of $10,000 forever, assuming a 5% real discount rate? $9,523.80 $200,000 Infinite $10,000There is an opportunity to earn P20,905 five years from now if you invest P9,524 today. What is the rate of return on investment?
- How much would you be willing to pay today for an investment that would return P1,250 each year for the next 10 years, assuming a discount rate of 12 percent? A. P4,062.75B. P5,062.75C. P6,062.75D. P7,062.75E. None of the above(Solving for i) You are considering investing in a security that will pay you $5,000 in 31 years. a. If the appropriate discount rate is 11 percent, what is the present value of this investment? (Round to the nearest cent.) b. Assume these investments sell for $1,680 in return for which you receive $5,000 in 31 years. What is the rate of return investors earn on this investment if they buy it for $1,680?Future Value You invest $1,000 today and exect to sell the investment for $2,000 in 10 years. a. Is this a good deal if the investment rate is 6%? b. What if the interest rate is 10%? Why ? Show the calculations in Excel.
- Q3: An investment promises the following payments: March 3 $1000; March 18 $2000; March 26 $3000. If the market interest rate is 5.16%, what is this investment value on March 28? ___________.What is this investment value on March 18? _____________. If you believe your required return for this investment should be 8.19%, how much are you willing to pay for this investment on March 1? _____________If you are promised $50,000 six years from now, the present worth at a real rate of return of 4% per year and an inflation rate of 3% per year is closest to:a. $27,600b. $29,800c. $33,100d. $37,200Suppose the risk-free interest rate is 4.6%. Having $600 today is equivalent to having what amount in one year? (Round to the nearestcent.) Having $600 in one year is equivalent to having what amount today? (Round to the nearestcent.) Which would you prefer, $600 today or $600 in one year? Does your answer depend on when you need the money? Why or why not? (Round to the nearestcent.)
- One investment plan that you can buy on 1st December 2020 promises to give you certain payment of Rs.5000 on 1st December 2022. Then the payment will grow at 10% per annum. Six such payments will be made, and the last payment will be made on 1st December 2027. a)Draw the cash flow diagram. b)What is the price you would pay to buy such a product if your required rate of return is 10% per annum?c)What is the equivalent equal annual cash flow amount if the amount is paid for 7 years (1st December 2021 to 1st December 2027) in seven equal installments instead of six growing installments?nal raté of return are you being offered? Check your answer using the Rule of 72. (See Problem 4.) 4.4 Calculating the Number of Periods You've been offered an investment that will pay you 7 percent per year. If you invest $10,000, how long until you have $20,000? How long until you have $30,000? (See Problem 5.)which of the following investments that pay will $5000 in 12 years have a higher price today? A. The security that earns an interest rate it 8.25% B. The security that earns an interest rate of 5.50%?