You are considering an investment that promises to pay $500every week for 2 years with...

You are considering an investment that promises to pay $500 every week for 2 years with the first payment made immediately. If the opportunity cost of the investment is 10% p.a. compounded quarterly, what is the investment’s value today?

Expert Solution

Effective quarterly rate = 10%/4 = 2.5%

Number of two-weeks in a quarter = 3 months per quarter * 2 two-weeks per month = 6

Effective two-week rate, r = (1 + 0.025)^(1/6) - 1

r = 0.004123915465

The first payment is immediate,

PV = PMT/r * (1 + r)

PV = 500/0.004123915465 * (1 + 0.004123915465)

PV = 121,243.9983902531 * 1.004123915465

PV = $121,743.9983902531

The investment's value today = $121,744

jeff jeffy answered 2 years ago

An investment fund promises to pay $1,000 in two years, then$3,000 in four years, and...

An investment fund promises to pay $1,000 in two years, then $3,000 in four years, and finally $5,000 in six years. If the market requires a 6% return for similar investments, what is the fair price to pay for this fund?A$7,811.48B$9,088.00C$6,791.08D$7,630.46E$7,369.32

How much would you be willing to pay today for an investment that promises to pay...

How much would you be willing to pay today for an investment that promises to pay you pay $26,000 in 35 years if your required return on the investment is 9% per year?

1) You just purchased an investment at a price of $2500. The investment promises to pay...

1) You just purchased an investment at a price of $2500. The investment promises to pay $400 in 1 year, $600 in 2 years, $800 in 3 years, $900 in 4 years, and $1200 in 5 years. What rate of return will you earn on this investment? Express your answers as a percentage. (Enter only numbers and decimals in your response. Round to 2 decimal places.) A. You wish to save $9,000 at the end of 5 years by depositing...

You are considering an investment that will pay you $3,000 for the next five years. That...

You are considering an investment that will pay you $3,000 for the next five years. That is, there will be five cash flows of $3,000, but the cash flows are paid at the beginning of the year. • Your opportunity cost of capital (r ) is 7.75%  Using the present value formula calculate the present value of each of the cash flows by 1. Discounting cash flows using annual compounding 2. Discounting cash flows using monthly compounding 3. Discounting...

you are offered an investment that promises to pay you $1.20 one year from today, $1.12...

you are offered an investment that promises to pay you $1.20 one year from today, $1.12 a year for the following two years, and then a final payment of $14.20 four years from now. What is the most you would pay for this investment today if you require a rate of return of 18.7%?

You are considering investment that is going to pay $1,500 a month starting 20 years from...

You are considering investment that is going to pay $1,500 a month starting 20 years from today for 15 years. If you can earn 8 percent return on any investment, compounded monthly, how much at most are you willing to pay for this investment opportunity? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

11. A corporation promises to pay you $8 a year for 20 years and $200 after...

11. A corporation promises to pay you $8 a year for 20 years and $200 after 20 years. What is the maximum amount you would pay for the security if you wanted to earn 8 percent? (5 points)

An investment promises to pay you $700 per year starting immediately. The cash flow from the...

An investment promises to pay you $700 per year starting immediately. The cash flow from the investment is expected to increase by 3 percent per year forever. If alternative investments of similar risk earn a return of 8 percent per year, determine the maximum you would be willing to pay for the investment. (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.)

When you retire, your company promises to pay you $1500 a month for 25 years. What...

When you retire, your company promises to pay you $1500 a month for 25 years. What is the value of this retirement annuity to you today, assuming 3%?

You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises...

You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises an expected return of 14.7% with a standard of 15.6%. The relatively less risky fund promises an expected return and standard deviation of 6.4% and 3.8%, respectively. Assume that the returns are approximately normally distributed. Using normal probability calculations and complete sentences, give your assessment of the likelihood of getting, on one hand, a negative return and on the other, a return above 10%...

Question