Question

In: Economics

Jim is offered an investment opportunity with the “guar­antee” that his investment will be 5 times...

  1. Jim is offered an investment opportunity with the “guar­antee” that his investment will be 5 times the investment in 12 years. Assuming quarterly compounding, what is the nominal interest rate Jim is getting on this investment?

Solutions

Expert Solution

Time period = 12 years

Let initial amount = A

Final amount = 5A

Compunding frequency = Quarterly

Let annual rate of return = r

Setting up formula:

5A = A (1+ r/(4*100))12*4

5A = A (1+ r/400)48

5 = (1+ r/400)48

Solving, we get: r = 13.64%

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

1.) Jim is offered a new position that will double his taxable income for 2018. If...
1.) Jim is offered a new position that will double his taxable income for 2018. If he accepts the new position how much more will he owe the IRS in 2018? 2.) Jim's boss Ron will have $676000/year taxable income in 2018. What will he owe the IRS?
7.  Jim is the sole provider of lawn mowing in his neighborhood. His cost, including the opportunity...
7.  Jim is the sole provider of lawn mowing in his neighborhood. His cost, including the opportunity cost of his time, of mowing is $60 per acre, regardless of the total area mowed. Assume that demand curve for lawn mowing in the neighborhood is given by P=240 - 5Q, where Q is the number of acres mowed. Further assume that Jim can negotiate the price of service with each homeowner individually so as to maximize his profit, while the homeowners do...
You are offered an investment opportunity which pays an annual interest rate of 2.6% for the...
You are offered an investment opportunity which pays an annual interest rate of 2.6% for the next five years. Your initial deposit is $3,000. Assumes interest is compounded quarterly. How much will you have at the end of five years? a. $3,415.05 b. $3,807.21 c. $3,410.81 d. $3,502.32 e. $3,098.78
You are offered the following investment opportunity: • Invest $425 today • Receive $100 at the...
You are offered the following investment opportunity: • Invest $425 today • Receive $100 at the end of Year 1; receive $200 at the end of year 3, and receive $350 at the end of Year 6 • You want to earn a required return of 13% Required: a) Should you invest in this opportunity b) Why or Why not?
You are offered the following investment opportunity: • Invest $425 today • Receive $100 at the...
You are offered the following investment opportunity: • Invest $425 today • Receive $100 at the end of Year 1; receive $200 at the end of year 3, and receive $350 at the end of Year 6 • You want to earn a required return of 13% Required: a) Should you invest in this opportunity b) Why or Why not?
Jim lost his job after his colleague Tom tarnished his reputation in the office. Jim subsequently...
Jim lost his job after his colleague Tom tarnished his reputation in the office. Jim subsequently sues Tom for this. Which of the following insurance policies would have covered such a risk for Tom? Health insurance policy Homeowner's insurance policy Disability insurance policy Personal liability insurance policy Whole-life insurance policy
You have been offered a unique investment opportunity. If youinvest $9,800 ​today, you will receive...
You have been offered a unique investment opportunity. If you invest $9,800 today, you will receive $490 one year from now, $1,470 two years from now, and $9,800 ten years from now.a. What is the NPV of the opportunity if the cost of capital is 6.9% per year? Should you take the opportunity?b. What is the NPV of the opportunity if the cost of capital is 2.9% per year? Should you take it now?
You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive...
You have been offered a unique investment opportunity. If you invest $20,000 today, you will receive $1,000 one year from now, $3,000 two years from now, and $20,000 ten years from now. (a) The NPV of the opportunity if the interest rate is 10% per year is $Answer . (Round to the nearest dollar.) Should you take the opportunity Reject it because the NPV is less than 0. Take it because the NPV is equal or greater than 0. (b)...
You have been offered a unique investment opportunity. If you invest $15,000 ?today, you will receive...
You have been offered a unique investment opportunity. If you invest $15,000 ?today, you will receive $750 one year from? now, 2,250 two years from? now, and $ 15 comma $15,000 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?
You have been offered a unique investment opportunity. If you invest $ 11 comma 300 $11,300...
You have been offered a unique investment opportunity. If you invest $ 11 comma 300 $11,300 ​today, you will receive $ 565 $565 one year from​ now, $ 1 comma 695 $1,695 two years from​ now, and $ 11 comma 300 $11,300 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 5.6 % 5.6% per​ year? Should you take the​ opportunity? b. What is the NPV of the opportunity if the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT