You saved $20,000.00 and want to diversify your monies. You invest 45% in a Treasury bond for 3 years at 4.35% APR compounded annually. You place 15% in a CD at 3.75% APR for 3 years compounded annually. 20% you invest in a stock plan and the remainder is in a savings account at 2.90% APR compounded annually. The stock plan increases 8% the first year, decreases in value by 4% the second year, and increases by 6% the third year. 1. What are the balances for each type of investment at the end of the third year? 2. What is your total gain from all of the investments combined? 3. If you had invested 45% in stock and 20% in Treasury bonds, would you have more or less of a gain after the three years?

You saved $20,000.00 and want to diversify your monies. You invest 45% in a Treasury bond for 3 years at 4.35% APR compounded annually. You place 15% in a CD at 3.75% APR for 3 years compounded annually. 20% you invest in a stock plan and the remainder is in a savings account at 2.90% APR compounded annually. The stock plan increases 8% the first year, decreases in value by 4% the second year, and increases by 6% the third year. 1. What are the balances for each type of investment at the end of the third year? 2. What is your total gain from all of the investments combined? 3. If you had invested 45% in stock and 20% in Treasury bonds, would you have more or less of a gain after the three years?

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. At 35 years old, you have an investment portfolio of $150,000. You are looking into adjusting the allocation of your investments for both your existing portfolio and your future contributions. It is currently at an 80/20 allocation, but now you want to adjust to a 70/30 allocation. You believe that 8% is what stocks will return over the next fifteen years, and 4% is what you expect to return in your bond portfolio. If you invest $700/month for the next fifteen years, what will your portfolio be worth? (assume monthly compounding) $598,652 $632,840 $724,248 $666,051 2. PowerTech Company has issued bonds paying a 4% Coupon Rate. The current market price of the bonds are $920. What is the Current Yield of the bond? 4% 4.9% 3.57% 4.3% 3. You are looking to buy a car that costs $25,000. Your bank has told you that they will give a five year loan with an APR of 8% that…
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Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
5. An analyst estimates that XYZ's earnings will grow from $13.00 a share to $18.84 per share over the next eight years. The rate of growth in XYZ's earnings is closest to: A. 4.75%. B. 4.82%. C. 4.92%. 6. If $15,000 is invested in a fund offering an APR of 20% quarterly compounded, approximately how many years will it take for the investment to reach $71,800? A. 8 years. B. 10 years. C. 11 years. Please provide an accurate answer.
An investor thought that market interest rates were going to decline. He paid $19,000 for a corporate bond with a face value of $20,000. The bond has an interest rate of 10% per year payable annually. If the investor plans to sell the bond immediately after receiving the 4th interest payment, how much will he have to receive in order to make a return of 14% per year? Solve using (a) tabulated factors, and (b) the GOAL SEEK tool on a spreadsheet.
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