Homework Answers
1) There will be a decrease in future consumption by 20%
FV of F0 after 1 year
1000 * 1.10 = 11000
F1 = 15000
If the 20% decrease is in F1
15000 * ( 1 - 0.2 ) = 12000
12000 + 11000 = 23000
23000 / 2 = 11500
Total = 15000 + 11000
= 26000
If the 20% decrease is in total
26000 * ( 1- 0.2 ) = 20800
20800 / 2 = 10400
2) if the intrrest rate is 6% and 12%
| Interest rate | ||||
| 10% | 6% | 14% | ||
| F0 | 10000 | 11000 | 11660 | 13292.40 |
| F1 | 15000 | 15000 | 15000 | 15000 |
| 20% decrease in F1 | 12000 | 12000 | 12000 | |
| Total | 23000 | 23660 | 25292.4 | |
| Smoothing Out | 11500 | 11830 | 12646.2 | |
| Total | 26000 | 26660 | 28292.4 | |
| 20% decrease in Total | 20800 | 21328 | 22633.92 | |
| Smoothing Out | 10400 | 10664 | 11316.96 |
In any case, the scenario of a higher interest rate or a 14%
interest rate is more advantageous.
Add Answer to:
Assume that you have two cash flows, one for time to and the other for time...
1. Time Value of Money You have been offered a unique investment opportunity. If you invest...
1. Time Value of Money You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive $1000 one year from now, $3000 two years from now, and $20,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 12% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 2% per year? Should you take the...
Imagine you have $10,000 that you want to invest and you want to invest in some...
Imagine you have $10,000 that you want to invest and you want to invest in some bonds. *You would be looking at the coupon rate (which is the interest rate that it will pay) since you want to get the highest return on your investment *You would also be looking at the risk rating to make sure it is not too risky or you might lose your money if the company gets into trouble financially. choose any company Example Microsoft...
Assignment I: Assume you have $50,000 to invest over the next five years. At the beginning...
Assignment I: Assume you have $50,000 to invest over the next five years. At the beginning of each year you can invest the available money in one, two or three-year time deposits. The bank pays 1.1% interest on one-year deposits, 2.1% interest (total) on two-year time deposits, and 3.2% interest (total) on three-year deposits. For instance, if you invest $1000 at the beginning of year 1 in one-year deposits, your return at the end of year 1, or beginning of...
You have the opportunity to invest in a project that produces the following cash flows: Year...
You have the opportunity to invest in a project that produces the following cash flows: Year CFs 0 1 $75 2 $225 3 $0 4 $300 If this project costs $500, what is the interest rate?
10. Uneven cash flows A Aa E A series of cash flows may concept of the...
10. Uneven cash flows A Aa E A series of cash flows may concept of the time valu s necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the Il continue to apply Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Year 1 Year 2 Annual Cash Flows Year 4 $180,000 $450,000 Year 3 Year 6 $375,000...
5. Assume you want to invest some money in the bond market for one year. If...
5. Assume you want to invest some money in the bond market for one year. If you expect that the interest rates will decline, what kind of bond that you would rather to invest, long-term bonds or short term bonds? Support your conclusion with numerical evidence. (Assume that all the 1-year, 2-years, 5-years, 10-years, and 20-years bonds have 10% coupon, annual coupon payment, for all of them current market price is 1000, and the interest rate will drop from 10%...
Suppose that you have $14,000 to invest and you are trying to decide between investing in project...
23
24
25
Suppose that you have $14,000 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 $16,500 at the end of 2 years. If you invest in project B, you will receive a payment of $25,000 at the end of 11 years. Assume the annual interest rate is 5 percent and that both projects carry no risk. Instructions: Round your...
Assume that you invest $100 at time zero and that your investment is worth $110 one...
Assume that you invest $100 at time zero and that your investment is worth $110 one period later. A. Did you make any money? How much in dollars? How much in percent return on investment? B. Use the rate of return on investment from your previous answer as the discount rate and compute what the NPV of your investment was. What is the NPV? Did you make any money? C. What does this say about a zero-NPV investment?
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6%...
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6% interest rate to invest in the stock market. You invest the entire 520,000 in an exchange-traded fund (ETF) with a 11% expected return and a 20% volatility Assume that the ETF you invested in returns - 10%. Then the realized return on your investment is closest to: O A. - 18% OB. -23% Oc. -26% OD. -10%
You have a firm that starts out with $60,000 in cash in the bank. You have...
You have a firm that starts out with $60,000 in cash in the bank. You have three investment opportunities: (1) You can invest $30,000 today and get back a gross payoff of $45,000 next year; (2) you can invest $20,000 today and get back a payoff of $ 24,000 next year; (3) you can invest $10,000 today and get back a payoff of $20,000 next year. You can undertake any or all of these investment opportunities. Suppose the interest rate...
1. Time Value of Money You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive $1000 one year from now, $3000 two years from now, and $20,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 12% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 2% per year? Should you take the...
Assignment I: Assume you have $50,000 to invest over the next five years. At the beginning of each year you can invest the available money in one, two or three-year time deposits. The bank pays 1.1% interest on one-year deposits, 2.1% interest (total) on two-year time deposits, and 3.2% interest (total) on three-year deposits. For instance, if you invest $1000 at the beginning of year 1 in one-year deposits, your return at the end of year 1, or beginning of...
10. Uneven cash flows A Aa E A series of cash flows may concept of the time valu s necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the Il continue to apply Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Year 1 Year 2 Annual Cash Flows Year 4 $180,000 $450,000 Year 3 Year 6 $375,000...
23
24
25
Suppose that you have $14,000 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 $16,500 at the end of 2 years. If you invest in project B, you will receive a payment of $25,000 at the end of 11 years. Assume the annual interest rate is 5 percent and that both projects carry no risk. Instructions: Round your...
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6% interest rate to invest in the stock market. You invest the entire 520,000 in an exchange-traded fund (ETF) with a 11% expected return and a 20% volatility Assume that the ETF you invested in returns - 10%. Then the realized return on your investment is closest to: O A. - 18% OB. -23% Oc. -26% OD. -10%
Most questions answered within 3 hours.
-
Let X be the amount of damage a particular company pays out (in
$) for a...
asked 10 minutes ago -
1. Choose the answer that is closest to the definition of a
significance level
a) If...
asked 1 hour ago -
When light is refracted, on what does the angle of refraction
depend? Select all that apply....
asked 1 hour ago -
A (726) g mass is hung on a spring. As a result the spring
stretches (16.5)...
asked 2 hours ago -
SOLUTION NOT NEEDED ONLY NEED THE ANSWERS, HOMEWORK IS DUE IN 30
MINUTES.
4)Which of the...
asked 2 hours ago -
You will select one card from a standard deck of 52 cards. What
is the probability...
asked 3 hours ago -
50% of the volume of a boat, sailing down the Mississippi (where
the water density ρ...
asked 3 hours ago -
Calculate how many moles of ions are in 1.4 L of 2.9 M KNO2
(aq). Remember...
asked 4 hours ago -
Experiment:
In the experiment: Mix together 74 g. (92 ml.) of n-butyl
alcohol and 120 g....
asked 5 hours ago -
This Python module will be menu driven
and use conditions to check user input in order...
asked 5 hours ago -
Tip Calculator App
For this project, you will create a tip calculator Android
app. The user...
asked 6 hours ago -
A first order chemical reaction has an energy of activation of
90.0 kJ/mol and a rate...
asked 7 hours ago