Present value (with changing interest rates). Marty has been offered an injury settlement of $12,000 payable in 4 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 4%. (The opportunity cost is the interest rate in this problem.) What if the opportunity cost is 7%? What if it is 11.5%? If Marty's opportunity cost is 4%, what is the present value of the injury settlement?

Present value (with changing interest rates). Marty has been offered an injury settlement of $12,000 payable in 4 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 4%. (The opportunity cost is the interest rate in this problem.) What if the opportunity cost is 7%? What if it is 11.5%? If Marty's opportunity cost is 4%, what is the present value of the injury settlement?

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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Present value (with changing interest rates). Marty has been offered an injury settlement of $15,000 payable in 3 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 3.5%. (The opportunity cost is the interest rate in this problem.) What if the opportunity cost is 6%? What if it is 10.5%? If Marty's opportunity cost is 3.5%, what is the present value of the injury settlement? $nothing (Round to the nearest cent.) If Marty's opportunity cost is 6%, what is the present value of the injury settlement? $nothing (Round to the nearest cent.) If Marty's opportunity cost is 10.5%, what is the present value of the injury settlement? $nothing (Round to the nearest cent.)
Using either the Present Value formaula or the Future Value formula, how do I solve the following problem? Show all work! PV(CF) = CF / (1+r)n FV(CF) = CF * (1+r)n Mr. Johnson wants to buy an annuity due that will provide him with income of $50,000 per year for six years. The going interest rate is 6.25%. How much would it cost him to buy the annuity today? (Draw a timeline and show your work.)
Jim Nance has been offered an investment that will pay him $860 three years from today. a. If his opportunity cost is 9% compounded annually, what value should he place on this opportunity today? b. What is the most he should pay to purchase this payment today? c. If Jim can purchase this investment for less than the amount calculated in part (a), what does that imply about the rate of return that he will earn on the investment?
A borrower can obtain an 80% loan with an 8% interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90% loan at an 8.5% rate with the same loan term. The borrower plans to own the property for the entire loan term. solve with finanical calucltor What is the incremental cost of borrowing the additional funds? How would your answer change if 2 points were charged on the 90% loan? Would your answer to part (b) change if the borrower planned to own the property for only 5 years?
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.
Tobi owns a perpetuity that will pay $1,500 a year, starting on year from now. He offers to sell you all of the remaining payments after the next 25 payments have been paid. what price should you offer him for payments 26 onward if you desire a rate of return of 8%? What does your offer price illustrate about the value of perpetuites?
(please finanas question correct answer) You want to buy a $243.000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. How much im the loan amount going to be? What will your monthly payments be if the interest rate is 5%? What will be your monthly payments if the interest rate is 6%?
Suppose you are given two loan options. The first one allows you to borrow money at 8.6% per year, compounded semi-annually. The other option allows you to borrow at 8.4% per year but compounded monthly. Calculate & explain which option is better from the borrower’s point of view. What is your conclusion from the answers ?
3. Suppose you decide to purchase a $150000 home for $20000 down. A down payment is subtracted from your home’s value and therefore you owe $130000. Well to pay for this amount you will need a loan, so $130000 is the principal on your loan. Suppose the interest rate on a 30 year mortgage is 4.5%. What will your monthly payment be? Create an amortization table for this loan. How much will you pay on the loan if you pay off the loan as
An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?
. You borrow $2mn at an interest rate of 5% per year to purchase a real estate property for the cost of $2.5mn. The borrowing costs are due only at the end of the year. (a) Suppose you sell the property for $2.7mn at the end of the year. What is the return on your equity? (b) Suppose the price of the property declines to $2.3mn after one year. What is the return on your equity? (c) Suppose the interest rate at which you can borrow is 1%. How do your answers change?
You want to buy a house that has a purchase price of 190,000. You plan to make a down payment of 10% of the purchase price and then borrow the rest. What is the dollar value of your down payment- $19,000 How much money will you need to borrow- $171,000 Need help with the below questions. Thank you for your help You have the option to take out a 30 year mortgage that has APR of 4% or a 20 year mortgage that has an APR of 3.25%. When answering the following questions base the mortgage payments on the amount you need to borrow rather than the entire purchase price 30 year mortgage If you take out a 30 year mortgage with APR of 4% what will you monthly payments be? Round to the nearest cent? If you make the payment you just calculated every month for 30 years how much will you pay altogether? What dollar amount of your total 30 year mortgage payments go to interest? The dollar amount of your interest is the difference between your total payments and the amount you borrowed. What…

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