Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 7QP
Summary Introduction
To determine: The number of periods of investment to double and quadruple the investment
Introduction:
The number of periods of investment helps to understand the time required for the money to grow. Suppose a person knows the
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Students have asked these similar questions
1. Find how long will it take for money to triple at {0.05, m = 2}
The rule of 72 provides a fast computation in finding the number of years required to double an
amount at a given interest rate, just divide the interest rate into 72. For example, if you want to know how
long it will take to double your money at 6%, divide 72 by 6 and get 9 years. The rule of 72 is accurate, as
long as the interest rate is less than 20%. If the unknown is the interest rate, run backward. Hence to double
an amount in 8 years, just divide 72 by 9 to find that it will require an interest rate of about 8%.
At 7.5 percent interest, how long does it take to double your money?
9. Suppose the interest rate is 3.8%.
a. Having $600 today is equivalent to having what amount in one year?
b. Having $600 in one year is equivalent to having what amount today?
c. Which would you prefer, S600 today or $600 in one year? Does your answer depend on when you need the money? Why or why not?
a. Having $600 today is equivalent to having what amount in one year?
It is equivalent to $
(Round to the nearest cent.)
b. Having $600 in one year is equivalent to having what amount today?
It is equivalent to $
(Round to the nearest cent.)
c. Which would you prefer, $600 today or $600 in one year? Does your answer depend on when you need the money? Why or why not?
"Because money today is worth more than money in the future, $600 today is preferred to $600 in one year. This answer is correct even if you don't need the money today, because by investing the $600 you receive today at the current interest rate,
you will have more than $600 in one year."
Is the above statement true or…
Chapter 5 Solutions
Fundamentals of Corporate Finance
Ch. 5.1 - Prob. 5.1ACQCh. 5.1 - Prob. 5.1BCQCh. 5.1 - Prob. 5.1CCQCh. 5.2 - Prob. 5.2ACQCh. 5.2 - Prob. 5.2BCQCh. 5.2 - What do we mean by discounted cash flow, or DCF,...Ch. 5.2 - Prob. 5.2DCQCh. 5.3 - Prob. 5.3ACQCh. 5.3 - Prob. 5.3BCQCh. 5 - You deposited 2,000 in a bank account that pays 5...
Ch. 5 - Prob. 5.2CTFCh. 5 - Charlie invested 6,200 in a stock last year....Ch. 5 - Prob. 1CRCTCh. 5 - Compounding [LO1, 2] What is compounding? What is...Ch. 5 - Prob. 3CRCTCh. 5 - Compounding and Interest Rates [LO1, 2] What...Ch. 5 - Prob. 5CRCTCh. 5 - Prob. 6CRCTCh. 5 - Prob. 7CRCTCh. 5 - Prob. 8CRCTCh. 5 - Prob. 9CRCTCh. 5 - Prob. 10CRCTCh. 5 - Prob. 1QPCh. 5 - Prob. 2QPCh. 5 - Calculating Present Values [LO2] For each of the...Ch. 5 - Calculating Interest Kates [LO3] Solve for the...Ch. 5 - Prob. 5QPCh. 5 - Calculating Interest Rates [LO3] Assume the total...Ch. 5 - Prob. 7QPCh. 5 - Calculating Interest Rates [LO3] According to the...Ch. 5 - Calculating the Number of Periods [LO4] Youre...Ch. 5 - Prob. 10QPCh. 5 - Prob. 11QPCh. 5 - Prob. 12QPCh. 5 - Calculating Interest Rates and Future Values [LO1,...Ch. 5 - Calculating Rates of Return [LO3] Although...Ch. 5 - Prob. 15QPCh. 5 - Prob. 16QPCh. 5 - Calculating Present Values [LO2] Suppose you are...Ch. 5 - Prob. 18QPCh. 5 - Calculating Future Values [LO1] You are scheduled...Ch. 5 - Prob. 20QP
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Similar questions
- 4. At 4.3 percent interest, how long does it take to double your money? To quadruple it? SHOW WORK AND FORMULA Present value $1 Interest rate 4.30% Future value $2 Future value $4 (Use cells A6 to B9 from the given information to complete this question.) Periods to double Periods to quadruplearrow_forwardSuppose the interest rate is3.6%. a. Having $650 today is equivalent to having what amount in one year? b. Having $650 in one year is equivalent to having what amount today? c. Which would you prefer, $650 today or $650 in one year? Does your answer depend on when you need the money? Why or why not? a. Having $650 today is equivalent to having what amount in one year? It is equivalent to $____. (Round to the nearest cent.)arrow_forwardHow long will an amount of money double at a simple interest rate of 2% per annum?arrow_forward
- Suppose the interest rate is 3.6% b. Having $650 in one year is equivalent to having what amount today? c. Which would you prefer, $650 today or $650 in one year? Does your answer depend on when you need the money? Why or why not? **round to the nearest cent**arrow_forwardHow long will it take to double your investment if the interest rate is r=0.06 (r=6%)?arrow_forward5. If the rate of inflation is 6.5%, what nominal interest rate is necessary for you to earn3.3% real interest rate on your investment?arrow_forward
- How long will it take to increase your investment by 2.5 times if the interest rate is r=0.14 (r=14%)?arrow_forward2. Find the future value of OMR10,000 invested now after five years if the annual interest rate is 8 percent. a. What would be the future value if the interest rate is a simple interest rate? b. What would be the future value if the interest rate is a compound interest rate?arrow_forwardKindly provide a CLEAR and COMPLETE solution.How long will it take money to triple itself if invested at (9/100)% compounded quarterly? What is the effective rate of interest?arrow_forward
- 6. If the effective interest rate is i per period and you invest b dollars at time 0, then the value at time n is b(1 + i)”. For example, if at time 0 you invest $100 at an effective interest rate of 6% per year, then the value at time 1 is $100(1+0.06) = $106. dollars. At time 2, the value will be $100 (1 + 0.06)² = $112.36. Similarly, the present value (value at time 0) of $100 received 2 years from now would be $100(1+0.06)-²≈ $88.99. Sometimes it's convenient to define d = 1/(1 + i) so that we would have $100(1+i)n = $100d". If the interest rate per year is i compounded semiannually, then the effective annual interest rate is (¹ + 2)²³ - 1₁ 1. For example, if the interest rate is 6% per year compounded semiannually, the effective annual interest rate is 1 + .06 2 2 - 1 ≈ 6.09%. If the interest rate per year is i compounded quarterly, then the effective annual interest rate is 4 (¹ + 4) * - 1 1. (a) If the interest rate is 6% per year compounded quarterly, what is the effective…arrow_forwardSuppose the risk - free interest rate is 4.2%.a. Having $200 today is equivalent to having what amount in one year?b. Having $200 in one year is equivalent to having what amount today?c. Which would you prefer, $200 today or $200 in one year? Does your answer depend on when you need the money? Why or why not?a. Having $200 today is equivalent to having what amount in one year?Having $200 today is equivalent to having Sin one year. (Round to the nearest cent.)arrow_forwardA sum of 2 million is equivalent to 2.36 million one year from now. Find interest rate?arrow_forward
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