Suppose you are offered two options: (i) receive Taka 30,000 at the end of 5 years or (ii) receive Taka P today and another P after two years. When you invest the Takas in business that pays 8% or more profit yearly. What value of P would be same as promise of Taka 30,000 to you after 5 years? Assume there is no risk in this future payment.

Suppose you are offered two options: (i) receive Taka 30,000 at the end of 5 years or (ii) receive Taka P today and another P after two years. When you invest the Takas in business that pays 8% or more profit yearly. What value of P would be same as promise of Taka 30,000 to you after 5 years? Assume there is no risk in this future payment.

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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Suppose you invest $2,000 today and receive $11,000 in five years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first one, what is the amount you will receive each year?
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