ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 31) Suppose in 2017 you buy two year $1,000 face-value 5% coupon bond for $1,000. In 2018, interest rates decrease to 2%. If you decide to sell your bond in 2018, what will be the selling price of your bond and one-year rate of return for you? A) $1,020; 7% B) $1,000; 2% C) $971; -2.1% D) $1,029.4; 7.9%arrow_forwardJohn is a very cost-conscious investor. His rule of thumb is that it costs $300 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $300 each year over the life of the car. John is now considering the purchase of a six-year old car with 40,000 miles on it for $7,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for seven years? John's interest rate is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 4% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.)arrow_forwarddo fastarrow_forward
- A bond has a face value of $15000 and pays an annual coupon rate of 7.2%. The bond is selling for $14990 now and is expected to be sold for $14800 one year from now. What is the bond's expected rate of return? Answer: % (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES.)arrow_forwardJohn is a very cost-conscious investor. His rule of thumb is that it costs $200 per year, starting in the first year of vehicle life to maintain an automobile. This expense increases by $200 each year over the life of the car. John is now considering the purchase of a four-year old car with 40,000 miles on it for $7,000. How much money will John have to set aside now to pay for maintenance (as a lump sum) if he keeps this car for eight years? John's interest rate is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year. John will have to set aside $ to pay for maintenance. (Round to the nearest dollar.)arrow_forwardA bond that is currently selling at $1,000 offers to pay $50 annually. What is the percentage rate of return on the bond? Multiple Choice 5 percent 10 percent 20 percent 50 percentarrow_forward
- 1 Jim owns shares of Abco, Inc. preferred stock which he says provides him with a constant 6.58 percent rate of return. The stock is currently priced at $45.60 a share. What is the amount of the dividend per share? Round to the nearest cent. Do not include the dollar sign in your answer. (i.e. If your answer were $123, then type 1.23 without a S sign)arrow_forwardBuena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inflow one year from now of $810,000. Assume the cost of capital is 10 percent. Required: 1. Break the $810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?arrow_forward
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