Suppose that annual income from a rental property is expected to start at P65,000 per year and decrease at a uniform amount of P2,500 each year after the first year for the 15-year expected life of the property. The investment cost is P400,000, and interest is 9% per year. Is this a good investment? Assume that the investment occurs at time zero (now) and that the annual income is first received at end of year one.

Suppose that annual income from a rental property is expected to start at P65,000 per year and decrease at a uniform amount of P2,500 each year after the first year for the 15-year expected life of the property. The investment cost is P400,000, and interest is 9% per year. Is this a good investment? Assume that the investment occurs at time zero (now) and that the annual income is first received at end of year one.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1. Suppose that annual income from a rental property is expected to start at P65,000 per year and decrease at a uniform amount of P2,500 each year after the first year for the 15-year expected life of the property. The investment cost is P400,000, and interest is 9% per year. Is this a good investment? Assume that the investment occurs at time zero (now) and that the annual income is first received at end of year one.
Compute the present value of an investment that generates incomeat a rate of 5000te 0·01t dollars per year forever, assuming an interestrate of 6%.
Assume that at the beginning of the year, you purchase an investment for $7,200 that pays $100 annual income. Also assume the investment's value has decreased to $6,800 by the end of the year. (a) What is the rate of return for this investment? (Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places.) Rate of return % (b) Is the rate of return a positive or negative number? Positive O Negative
Assume that at the beginning of the year, you purchase an investment for $6,300 that pays $130 annual income. Also assume the investment's value has increased to $6,900 by the end of the year. a. What is the rate of return for this investment? Note: Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places. Rate of return % b. Is the rate of return a positive or a negative number? Positive Negative
D)Consider an investment that pays Rs. 6,880 in interest every year plus 86,000 when it matures in 12 years. You can buy the investment today for Rs. 64,758. What is the IRR of this investment?
Suppose you have an investment offer that guarantees an average investment gain of $1,000 per year. (a) What is the average rate of change (in dollars per year) of this investment? $? per year (b) If the value of the investment today is $10,000, what will be the value (in dollars) of the investment in 2 years? $?
ou can assume that all payments are made at the beginning of the period and use "1" for the "type" argument in the formula. A. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded annually? B B. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded quarterly? 4 5 6 27 28 29 C. Suppose you invest St $ 570 monthly. What is the future value of the investment in 29 years, if interest at 5% is compounded monthly? Question 1 Question 2 + Ready Accessibility: Investigate MAR 17 A W +
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?
Of the following investments, which would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments). Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments). Investment D pays $2,500 at the end of 10 years (just one payment). Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).
A business is planning to purchase a piece of equipment that will produce a continuous stream of income for 8 years with rate of flow f(t) = 9,000. If the continuous income stream earns 6.65%, compounded continuously, what single deposit into an account earning the same interest rate wi produce the same future value as the continuous income stream? (This deposit is called the present value of the continuous income stream.) What is the future value of the investment? $ (Round to the nearest dollar as needed.) What is the present value of the investment? (Round to the nearest dollar as needed.)
Assume that at the beginning of the year, you purchase an investment for $6,500 that pays $95 annual income. Also assume the investment's value has increased to $7,050 by the end of the year. a. What is the rate of return for this investment? Note: Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places.
A property is being valued as if it will yield a perpetual annual stream of profits, starting 2 years from today with $36,000, and then growing each year at a rate of 1% APR compounded annually. What is the present value of these profits if the discount rate is 5.2% APR compounded annually? A) 812235 B) 814775 C) 815554 D) 816327

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