In: Finance
Sasha owns two investments, A and B, that have a combined total value of 59,400 dollars. Investment A is expected to pay 28,000 dollars in 3 year(s) from today and has an expected return of 17.1 percent per year. Investment B is expected to pay 55,734 in 2 years from today and has an expected return of R per year. What is R, the expected annual return for investment B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
Now, Sasha owns two investments, A and B, that have a combined total value of 52,600 dollars. Investment A is expected to pay 22,500 dollars in 3 year(s) from today and has an expected return of 12.11 percent per year. Investment B is expected to pay 60,905 dollars in T years from today and has an expected return of 3.69 percent per year. What is T, the number of years from today that investment B is expected to pay 60,905 dollars? Round your answer to 2 decimal places (for example, 2.89, 14.70, or 6.00).'
2 year(s) ago, Sasha invested 6,310 dollars. In 1 year(s) from today, he expects to have 8,890 dollars. If Sasha expects to earn the same annual return after 1 year(s) from today as the annual rate implied from the past and expected values given in the problem, then how much does Sasha expect to have in 6 years from today?
Solution :- (1)
Combined total Value = $59,400
Now $59,400 = [ $28,000 / ( 1 + 0.171 )3 ] + [ $55,734 / ( 1 + r )2 ]
= $59,400 = ( $28,000 * 0.6228 ) + [ $55,734 / ( 1 + r )2 ]
[ $55,734 / ( 1 + r )2 ] = $41,962.37
( 1 + r )2 = 1.32819
( 1 + r ) = 1.1525
r = 0.1525 = 15.25%
Therefore , the expected annual return for investment B = 0.1525
(B)
Combined total Value = $59,400
Now $52,600 = [ $22,500 / ( 1 + 0.1211 )3 ] + [ $60,925 / ( 1 + 0.0369 )t ]
= $52,600 = ( $22,500 * 0.7097 ) + [ $60,925 * ( 1 + 0.0369 )-t ]
= [ $60,925 * ( 1.0369 )-t ] = $36,632.04
( 1.0369 )-t = 0.60126
( 1.0369 )t = 1.66316
Take Log Both Sides
t log (1.0369 ) = Log ( 1.66316 )
t = 14.04 ( Approx )
= 14.04 Years
(C)
Invested 2 Year ago = $6,310
Investment after 1 Year = $8,890
Return (r ) = ??
$8,890 = $6,310 * ( 1 + r )3
( 1 + r )3 = 1.40887
1 + r = 1.12105
r = 0.12105 = 12.105%
Now Amount after 6 Years from today = $8,890 * ( 1 + 0.12105 )5
= $8,890 * 1.7706
= $15,740.55
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