Kristi is considering an investment that will pay $7,500 a year for eight years, starting one...

Kristi is considering an investment that will pay $7,500 a year for eight years, starting one year from today. How much should she pay for this investment if she wishes to earn a 6% rate of return? Provide complete calculations in your answer

Kristi was offered three (3) different assets, as listed below:

 Asset 1 pays annual interest rate of 9% compounding annually.
 Asset 2 pays annual interest rate of 8.9% compounding semi-annually.
 Asset 3 pays interest rate 8.95 compounding monthly.

Based on effective annual interest rate calculations, which of the above assets is the best choice for Kristi. Show your calculations for all three (3) assets.

Expert Solution

jeff jeffy answered 1 year ago

An investment will pay $16,100 at the end of each year for eight years and a...

An investment will pay $16,100 at the end of each year for eight years and a one-time payment of $161,000 at the end of the eighth year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Determine the present value of this investment using a 6% annual interest rate. (Round your answer to the nearest whole dollar.)

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What...

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What is the present value (in $) of this perpetuity on the date that it is purchased, given that the interest rate is 4%? (Round your answer to the nearest cent.) $

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.)

Investment X offers to pay you $4,200 per year for eight years, whereas Investment Y offers...

Investment X offers to pay you $4,200 per year for eight years, whereas Investment Y offers to pay you $6,100 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent?

A lease on Times Square will pay $1,000,000 annually (starting in one year) for 25 years...

A lease on Times Square will pay $1,000,000 annually (starting in one year) for 25 years at a growth rate of 2%. Similar properties are discounted at a 5% rate. What is the value today (present value) of this growing annuity cash flow stream? (round to the nearest dollar)

You are considering an investment that will pay you $1,200 in one year, $1,400 in two...

You are considering an investment that will pay you $1,200 in one year, $1,400 in two years, and $1,600 in three years, $1,800 in four years, and $11,000 in five years. All payments will be received at the end of the year. • Your opportunity cost of capital (r ) is 10.5% • 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...

1.You are considering an investment that will pay you $1,200 in one year, $1,400 in two...

1.You are considering an investment that will pay you $1,200 in one year, $1,400 in two years, and $1,600 in three years, $1,800 in four years, and $11,000 in five years. All payments will be received at the end of the year. • Your opportunity cost of capital (r ) is 10.5% • 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...

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?

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...

An investment is scheduled to pay $1,000 one year from now; $2,000 two years from now;...

An investment is scheduled to pay $1,000 one year from now; $2,000 two years from now; $3,000 three years from now, and this pattern is expected to remain the same in perpetuity (i.e., $1,000 on t=4; $2,000 on t=5; $3,000 on t=6; etc.). If the discount rate on the project is 8% (effective annual rate), what is the present value of the investment. A. $79,080 B. $75,050 C. $28,306 D. $24,360

Question