You may have already won $2 millions. You will receive $100,000 per year for 20 years.Suppose you are considering the following two options:First Choice: You save your winning for the first 7 years and then spend every cent ofthe winning in the remaining 13 yearsSecond Choice: You do the reverse, spending for 7 years and then saving for 13 yearsIf you can save wining at 7% interest, how much would you have at the end of 20 years andwhat interest rate on your saving will make the two options equivalent?

Future value of the money depends on the amount of deposit done and amount of interest accumulated…

You may have already won $2 millions. You will receive $100,000 pe uppose you are considering the following two options: rst Choice: You save your winning for the first 7 years and then spend e winning in the remaining 13 years econd Choice: You do the reverse, spending for 7 years and then savin you can save wining at 7% interest, how much would you have at the e hat interest rate on your saving will make the two options equivalent ?

You may have already won $2 millions. You will receive $100,000 pe uppose you are considering the following two options: rst Choice: You save your winning for the first 7 years and then spend e winning in the remaining 13 years econd Choice: You do the reverse, spending for 7 years and then savin you can save wining at 7% interest, how much would you have at the e hat interest rate on your saving will make the two options equivalent ?

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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Similar questions

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?
An investment plan gives you 4 different options: Plan A: receive $325,000 today: Plan B: receive $20,000 for 25 years; Plan C: receive $10,000 per year for 25 years plus a one time payment of $100,000 in 25 years; or Plan D: receive $15,000 forever. If the current rate of return is 12%, what is the present value of Plan D? Above $300,000 $225,000 to $300,000 Below $75,000 $150,000 to $225,000 $75,000 to $150,000
Suppose that you have $16,000 to invest and you are trying to decide between investing in project A or project B. If you invest in project A, you will receive a payment of $19,000 at the end of 3 years. If you invest in project B, you will receive a payment of $48,000 at the end of 21 years. The annual interest rate is 5 percent and both projects carry no risk. Instructions: Round your answers to the nearest dollar. Do not round your intermediate calculations. a What is the present value of each project? Enter your answers in the table below. Project A Project B Present Value $ s b. Which project will you choose for your investment? O Project A O Project B
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.
An example of how to calculate net present value is done using the following. Imagine you have been given an investment opportunity wherein if you invest $1,200 today, you will receive $650 dollars at the end of each year for the next 5 years. You could separately choose to invest your money at 10% interest each year. Should you take the investment opportunity? To find the answer, use the NPV formula:
An investment will generate $9,000 a year for 20 years. If you can earn 9 percent on your funds and the investment costs $100,000, calculate the present value of investment. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it?-Select-YesNoItem 2 Calculate the present value of investment, if you could earn only 5 percent. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it in this case?-Select-YesNo
You have three options to choose for an investment: (1) Pay 15,000 and you will receive P20,000 after 4 years (2) Pay P10,000 an you will receive 4,000 every year for 3 years and (3) Pay 12,000 and you will receive P15,000 in 2 years. Which will be the best choice?
An investment will generate $12,000 a year for 30 years. If you can earn 12 percent on your funds and the investment costs $100,000, calculate the present value of investment. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it?-Select-YesNoItem 2 Calculate the present value of investment, if you could earn only 9 percent. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it in this case?
You are trying to decide between two options. Option A: You can pay $50,000 this year to take a training class and earn $125,000 per year for the next two years Option B: You can start work this year and make $60,000 per year this year and each of the next two years. a. What is the Present Value of Option A assuming a 5% interest rate? b. What is the Present Value of Option B assuming a 5% interest rate? c. What is the Present Value of Option A assuming a 10% interest rate? d. What is the Present Value of Option B assuming a 10% interest rate?
You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 8% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 4% per year? Should you take the opportunity? a. What is the NPV of the investment opportunity if the interest rate is 8% per year? The NPV of the investment opportunity if the interest rate is 8% per year is $. (Round to the nearest dollar.) Should you take the investment opportunity (Select the best choice below.) A. Reject it because the NPV is less than 0. B. Take it because the NPV is equal to or greater than 0. b. What is the NPV of the investment opportunity if the interest rate is 4% per year? The NPV of the investment opportunity if the interest rate is 4% per year is $ (Round to the nearest dollar.) Should…
You plan to purchase a rented house which you could rent to earn you an annual income of $12,000. The expected annual expenses of the house are $3,000. You plan to sell the house for $145,000 at the end of ten years .a. Draw a cash flow diagram for this investment if you consider 18% to be a suitable interest rateb. Determine how much you could afford to pay for it now.
You are trying to decide how much to save for retirement. Assume you plan to save $5,000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making you last $5,000 investment. c. If you hope to live for 20 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 20th withdrawal (assume your savings will continue to earn 10% in retirement)? d. If, instead, you decide to withdraw $300,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?

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