1. An investment will return $1,000 in cash in each of years 4 and 5. You...

1. An investment will return $1,000 in cash in each of years 4 and 5. You expect to earn 10%. Is the present value (PV) for this investment properly calculated by the expression: $1,000 (PV/A, 10%, 2) (PV/FV, 10%, 3)?

2. For the above investment, is the PV properly calculated by: $1,000 (PV/A, 10%, 2) (1/(1.1)² )?

3. For the above investment, is the PV also properly calculated by: $1,000/(1.1)⁴+ $1,000/(1.1)⁵ ?

4. A company issues $100k worth of bonds to fund the construction of a new building. The bonds pay $7K per annually at the end of each year for the next 10 years. At the end of the 10^th year the company also pays the lender back the $100k:

a) What is the interest rate the company is paying on the bonds?

b) The moment after the $100k of bonds issues the company announces it has lost a big account. The $100k worth of bonds are trading on the open market. For this reason, their value drops from $100k to $81.6k. What is the interest rate the bonds are now paying?

Expert Solution

jeff jeffy answered 3 months ago

You make a 5 year investment. The investment returns in each of the 5 years are:...

You make a 5 year investment. The investment returns in each of the 5 years are: 3%, 10%, -15%, 0%, and 25% What is the holding period return of your stock investment? What is the arithmetic mean annual return of the investment? What is geometric mean annual return of the investment? If the order of the returns were reversed (so 25%, 0%, -15%, 10%, 3%), would the ending value of your investment be different?

An investment is expected to produce cash flows of $1,000 at the end of each of...

An investment is expected to produce cash flows of $1,000 at the end of each of the next 6 years, then an additional lump sum payment of $1,500 at the end of Year 6. What is the maximum price you are willing to pay for this investment now if your expected rate of return is 4%? Select one: a. $5,324.89 b. $5,974.77 c. $5,568.13 d. $6,427.61 e. $4,854.13

Given a 4% required return, what is a $100 cash flow today, a $1,000 cash flow...

Given a 4% required return, what is a $100 cash flow today, a $1,000 cash flow at the end of 1 year, and a $100,000 cash flow at the end of five years, worth to you TODAY? Referring to the question above, what would those same cash flows be worth to you at the end of five years?

1.You have a 4-year investment holding horizon, would like to earn a 5% annual compound return...

1.You have a 4-year investment holding horizon, would like to earn a 5% annual compound return each year, you have a choice between two bonds. Whatever money you have to invest will be invested in one type of bonds or another. Find the Duration and Modified Duration for each bond Bond 1 has a 5% annual coupon rate, $1000 maturity value, n = 4 years, YTM =5% (pays a $50 annual coupon at the end of each year and $1,000...

Find the rates of return to do the following: A.) Double an investment in 4 years,...

Find the rates of return to do the following: A.) Double an investment in 4 years, B.) double the investment in 10 years, C.) triple an investment in 4 years, triple an investment in 10 years

10 years ago you invested $1,000. If your investment is worth $6,000 now, what was your rate of return?

10 years ago you invested $1,000. If your investment is worth $6,000 now, what was your rate of return?Multiple Choicea. 17.46% +/- 1.00%b. 10.74% +/- 1.00%c. 13.12% +/- 1.00%d. 19.62% +/- 1.00%

A bond with a $1,000 par, 4 years to maturity, a coupon rate of 5%, and...

A bond with a $1,000 par, 4 years to maturity, a coupon rate of 5%, and annual payments has a yield to maturity of 4.3%. What will be the percentage change in the bond price if the yield changes instantaneously to 4.9%?

12 percent bond, face value of $1,000 , life of 5 years. return required by the...

12 percent bond, face value of $1,000 , life of 5 years. return required by the market is 10 percent coupon payments are made once annually. Figure out price of bond at time of flotation on the market. end of year three, the market requires a return of 8 percent instead of 10 percent find the market price at this time. What is the yield of a two year zero coupon bond, when the market price is $970 and a...

Determine the rate of return for this project. Year 0 1 2 3 4 5 Cash...

Determine the rate of return for this project. Year 0 1 2 3 4 5 Cash flow -$12,300 $4000 $4000 $3000 $3000 $3000 14.21% 12.75% 13.11% 13.85%

An investment promises to return $8,000 at the end of each of the next eight years...

An investment promises to return $8,000 at the end of each of the next eight years and then $3,000 at the end of each of the remaining seven years (years 9 through 15). What is the value of this investment today at a 9 percent interest rate?

Question