Your friend offers you an investment opportunity. If you give him $1,200 today, his project will provide you with the following cash flows in Years 1-4: $100, $200, $600, $550. You required 10% return on investments of this risk level. Alternatively, you can invest your $1,200 in the money market fund at 4% today. Which of the two options is a better investment opportunity? Q4. There are two different ways to answers the question (both lead to the same conclusion). Show the complete formula (not the calculator shortcuts) with all the necessary terms that you would use to solve the problem as if you didn't have a financial calculator on hand. Q5. Circle the better investment opportunity: Friend's project / Money market fund

Your friend offers you an investment opportunity. If you give him $1,200 today, his project will provide you with the following cash flows in Years 1-4: $100, $200, $600, $550. You required 10% return on investments of this risk level. Alternatively, you can invest your $1,200 in the money market fund at 4% today. Which of the two options is a better investment opportunity? Q4. There are two different ways to answers the question (both lead to the same conclusion). Show the complete formula (not the calculator shortcuts) with all the necessary terms that you would use to solve the problem as if you didn't have a financial calculator on hand. Q5. Circle the better investment opportunity: Friend's project / Money market fund

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 have a financial investment opportunity for which if you invest $2,000 today, you will receive $100 per year for 3 years plus $2,500 in the third year. Is this worthwhile in financial terms if the interest rate on the best alternative use of the funds is 10% How would I plug this into a finacial calculator? usin N, I/Y, PV, PMT,FV
You are thinking about investing in a project that will provide you a cash flow of $78922 in 3 years and of $88519 in 4 years. If your required return on investments of this risk is 15.14%, how much are you willing to pay for this opportunity? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
An investor has to decide how much he will be willing to pay for an investment that generates the following stream of future cash flows: Yr1 = 35, Yr2 = 40, Yr3 = 45, Yr4 = 50, Yr5= 55. His minimum required rate of return is 9 percent. How much should he be willing to pay for it today?
Suppose you have a medium risk-tolerance, and you want an annual return of $355. You decide to invest part in Fund A and the rest in Fund B. How much do you need to invest in Fund A? $ . Round to the nearest cent. Appreciate it thanks!!@@
You have $5000 to invest for 1 year. Fund A has an estimated 4% annual return, and Fund B has an estimated 10% annual return. Fund A is more stable, and preferred among investors with low risk tolerance. Fund B is less stable, but has larger returns. Answer the following questions about this investment opportunity. 1. Suppose you have a low risk-tolerance, and you invest everything in Fund A. How much do you expect to make on your investment?Round to the nearest cent. 2. Suppose you have a medium risk-tolerance, and you want an annual return of $355. You decide to invest part in Fund A and the rest in Fund B. How much do you need to invest in Fund A?
You have an opportunity to make an investment that will pay $100 at the end of year 1, $400 at the end of year 2, $400 at the end of year 3, $400 at the end of year 4 and $300 at the end of year 5. Find the present value of this cash flow stream if the interest rate is 8%. (Hint: You can simply discount each cash flow to the present and then add them up or use the "=NPV function" in Excel or the CF key on your financial calculator a. $1,251.25 b. $1,351.25 c. $1,151.25 d. $1,451.25 a.. b.. C. . d..
There are two investment options available for you. The first option requires you to invest 5,000$ in 1 year with 7% interest rate and collect your return in year 27. Second option requires you to put 500$ today with 11% interest rate and collect the fund in year 65. What is the compounding effect combination of these two investments? Select one: a.470,570 b.410,795 C.490,510 d.465,070
You are evaluating five different investments, all of which involve an upfront outlay of cash. Each investment will provide a single cash payment back to you in the future. Details of each investment appears here: Calculate the IRR of each investment. State your answer to the nearest basis point (i.e., the nearest 1/100th of 1%, such as 3.76%). The yield for investment A is The yield for investment B is The yield for investment C is The yield for investment D is The yield for investment E is %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) C Data table Investment A B с D E Initial Investment $1,600 $10,000 $600 $3,400 $5,200 Future Value Print $3,120 $15,775 $2,923 $4,526 $8,789 End of Year 10 11 16 Done 3 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) 12 D X
Suppose you have recently accepted a new job and are setting up your retirement allocations within the firm's 401k plan. The plan options contain two risky mutual funds, A and B. You may assume that all fees are the same across the two funds. Fund A has an expected return of 6% and the standard deviation of returns is 12%. Fund B has an expected return of 7% and the standard deviation of returns is 15%. The correlation between returns on the two funds is 0. The plan also contains a Treasury fund which provides a risk-free return of 3%. A Suppose you can only invest in one of the two risky mutual funds (A or B), but can combine it with the Treasury fund in any proportions you wish. Which of the two mutual funds would you choose and why B Maintaining the restrictions on your investment choices from the last question, what is the best expected return you could achieve if you set up a portfolio with a standard deviation of returns equal to 10%? (Please express your answer in percentage…
MIA Q.1) Your company expects to earn at least 18 percent on its investments. You have to choose between two similar projects (A&B). Below is the cash information for each project. Which of the two projects would you fund if the decision is based only on financial information by using net present value model? if you use payback model which project you will choose? show your calculations? Year 0 1 2 Outflow 225000 190000 0 0 Inflow C.f DE P.V Year Outflow Inflow c. f = R-C C. F D. F P.V 3 30000 0 150000 220000 -225000-190000 150000 10000 - (1+k)" 0 300000 0 5 7 30000 0 30000- 215000 205000 197000 100000 215000 175000 197000 70000 0.847 0.718 3.669 0.516 0.437 0.37 0.314 -225000-160930 107700 115710 110 94076475 72890 219743 7: Project A 4 0 1 2 100000 0 P.V of of WPV = 5PV Project B 3 4 50000 0 50000 150000 250000 250000 200000 250000 -50000 150000 300000 1 0-8470-718 0.609 0.516 -3.000.0042356107700 اسمان M 6 0 wp-v-11975 11976 15 7 50000 30000 200000 180000 120000 150000 180000 90000…
Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all work
Suppose you are considering investing $1,000 in a load fund that charges a fee of 7%, and you expect your investment to earn 13% over the next year. Alternatively, you could invest in a no-load fund with similar risk that charges a 1% redemption fee. You estimate that this no-load fund will earn 11%. Given your expectations, which is the better investment and by how much? Do not round intermediate calculations. Round your answers to two decimal places. Load fund growth: No-load fund growth: The-Select- fund is better by % % %.

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