Question

5.An investment will pay you $3,096 in 1 years if you pay $1,980 today. What is the implied rate of return? (Convert to a decimale. Round to 2 decimal places.)

6.In 1998, the average price of a gallon of gas was $1.09. Today, the average price of a gallon of gas is $2.84. At what annual rate has a gallon of gas increased over the last 20 years? (Answer as a percent. Enter only numbers and decimals in your response. Round to 2 decimal places.)

7.Your goal is to have $76,023. If you can earn 11.9% per year and you invest $18,064 today, how many years until you reach your goal?

8.You are buying an investment property for $383,240 today. Through research, you have determined that the value of the property is likely to grow at a rate of 7.17% per year, on average. How long until the value of the property grows to $521,360?

9.Calculate the value of the cash flows at time 6. The interest rate is 11.99%.

0	1	2
$1,135	$2,375	$3,065

10.You are looking at an investment that will pay you $25,919 in year 2, $42,812 in year 4 and $45,841 in year 6. If your required return is 8.34%, what is the most you should pay for the investment? (In other words, how much is the project worth today?)

Answer 1

Answer to Q#5 (First question in the list): 1 # of years left to maturity, NPER Annual deposit amount, PMT Initial deposit made today, PV Target maturity value at the end, FV Interest compounding type, TYPE Implied rate of return earned $0 $1,980 $3,096 0 = 0 if compounded at the end of each period; 1 if compounded at the beginning of each period 56.36% [Ref: EXCEL SCREENSHOT] EXCEL SCREENSHOT: с D E 1 1 Implied rate of return earned is calculated using EXCEL FUNCTION RATE(nper,pmt,pv,fv,type) where nper=1; pmt=-0; pv=1980; fv=-3096; type=0; Here, fv is negative as it denotes cash inflow; pv is positive as it denotes cash outflow; type = 0 as interest compounds at the end of each period only. A B # of years left to maturity, NPER 2 Annual deposit amount, PMT $0 3 Initial deposit made today, PV $1,980 4 Target maturity value at the end, FV $3,096 5 Interest compounding type, TYPE 0 = 0 if compounded at the end of each period; 1 if compounded at the beginning of each period 6 Implied rate of return earned =RATE(B1,-B2,B3,-B4,B5) [Ref: EXCEL SCREENSHOT] 7