Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Assume that you contribute $5,000 per year to a retirement plan for 20 years. Then you are able to increase the contribution to $7,500 per year for another 20 years. Given an 8.0 percent interest rate, what is the value of your retirement plan after 40 years? Hint: This is equivalent to saving $5,000 each year for 40 years (from year 1 to year 40) and $2,500 each year for 20 years (from year 21 to year 40) O $$1,455,270 O $1,409,688 O $$1,492,875 O $1,411,904arrow_forwardBONUS: If you expect to receive the following cash flow at the end of each year, what is the fair price of this financial contract that you should be willing to pay? Assume 5% interest rate, and round your answer to the nearest hundredth decimal point. Year 1 2 3 4 CF $1000 $2000 $3000 $7000arrow_forwardYou are considering purchasing an investment contract that will eventually pay you $4,000 per year at the end of each year for seven years. The appropriate interest rate for the risks involved is 6.4% The first payment begins in 6 years. What price should you pay today to purchase this contract (rounded to nearest dollar) ? (Do not round interim calculations)arrow_forward
- Imagine you received two offers. You need to decide which one means more money for you! OFFER #1: Right away, you receive $2,470,000. Also, you will receive 40 back-to-back payments of $1,235,000 each, six months apart, and the first one of these will take place in one year. The discount rate is 8 percent, with daily compounding. OFFER #2: Right away, you receive $27 million. And nothing else in the future. To make your decision, you need to first figure out how much Offer #1 is worth to you in today's dollars. The answer is: $ (Assume thirty days in each month and twelve months in each year.) (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.) Present valuearrow_forward4. You want to buy a house that costs $620,000. You can put $55,000 down. You get a 30 year fixed-rate loan with an APR of 4.5% compounded monthly. Mor Determine the monthly payment. Show clear work. Work: Work: Answer: Find the total closing costs if they consist of a fee of $1600 and 3 points. Answer: www Suppose that you invest $4800 in an account with an APR of 6.9%, compounded continuously. Determine how much you will have after 3 years. Assume that no additional deposits are made.arrow_forwardThe stock market has an average annual return of 10% per year. We will consider the annual return to be an annual interest rate Suppose instead you want to put a 15% down payment on a $500,000 house in Texas. If you get a $6000 signing bonus from your first post-college job, how long would it take for you to pay for the down payment on this house using your signing bonus (assuming 10% annual interest compounded annually)?arrow_forward
- You have been offered a job with an unusual bonus structure. As long as you stay with the firm, you will get an extra $ 66 comma 000 every 7 years, starting 7 years from now. What is the present value of this incentive if you plan to work for the company for 42 years and the interest rate is 5% (EAR)? (Note : Be careful not to round any intermediate steps less than six decimal places.)arrow_forwardSelect the best answer for the question. 20. You want to invest money for three years in an account that pays nine-percent interest annually. How much would you need to invest today to reach a future goal of $12,000? (Round your answer to the nearest dollar.) A. $10,984 OB. $10,100 OC. $11,432 OD. $9,266arrow_forwardPlease solve asaparrow_forward
- Your new job offers a savings plan that pays 0.75 percent in interest each month. You can't participate in the plan, however, until you have 5 years with the company. At that time you will start saving $100 a month for the next 28 years. How much will you have in this savings account in 33 years? Round your answer to two decimals. $ Another perk of your new job is that, after 5 years with the company, you will also get an increase of $125 in your monthly salary. Assume you would stay with the company for 28 more years after getting the salary increase, and that you discount at 0.75 percent each month. What is this salary increase worth to you today? Round your answer to two decimals.arrow_forwardPlease show working Someone promises to pay you $1,000 in years 5, 10 and 15 for a total of $3,000. Assume your required return is 8%. a. what is the duration of this promise to pay you $3,000 over 15 years? b. what's the convexity? c. using the duration estimate alone, what is the estimated percentage price change in t=0 value if rates are expected to increase 2%?arrow_forward2.25. You expect to receive $10,000 as a bonus after 6 years. You have calculated the present value of this bonus and the answer is $7000. What interest rate did you use in your calculation?arrow_forward
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