Suppose that you are offered an investment that will cost $898 and will pay you interest...

Suppose that you are offered an investment that will cost $898 and will pay you interest of $70 per year for the next 20 years. Furthermore, at the end of the 20 years, the investment will pay $1,000. If you purchase this investment, what is your compound annual rate of return?

Solutions

Expert Solution

compound annual rate of return =Using rate function in MS excel	rate(nper,pmt,pv,fv,type) nper =20 pmt =70 pv =-898 fv =1000 type =0	RATE(20,70,-898,1000,0)	8.04%
compound annual rate of return			8.04%

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Suppose that you are offered an investment at cost of 800. That investment will pay the...

Suppose that you are offered an investment at cost of 800. That investment will pay the following cash flows. 0. 1. 2. 3. 4. 5 0. 500. 400. 300. 200. 100 A) should you make the investment if the required rate of return is 12% per year? why? explain. B) What is the internal rate of return of this cash flow stream? if you require a rate of return of 12% annually. Should you make the investment? Why? explain.

Suppose you are offered an investment that will pay you $2,975 a month for 15 years....

Suppose you are offered an investment that will pay you $2,975 a month for 15 years. If your required return is 9% per year, compounded monthly, what would you be willing to pay for this investment?

You are offered an investment that will pay you $150 at the end of year one,...

You are offered an investment that will pay you $150 at the end of year one, $250 at the end of year four, and $800 at the end of year eight. What is the total present value of these three cash flows if the discount rate is 6%?

Assume you are offered an investment that will pay you $3,000 at time 0. For year...

Assume you are offered an investment that will pay you $3,000 at time 0. For year 1 the cash inflow will be $1,000 and then will decline at a rate of 20% per year for 30 years, that is, each year after year 1 will be 80% of the prior year through 30 years. If the required rate of return is 14%, what is the value of this stream of cash flows, including the value received today? Use equations or...

You are offered an annuity investment that will pay you $ 25,000 per year for 10...

You are offered an annuity investment that will pay you $ 25,000 per year for 10 years beginning in 20 years. These payments will be made at the beginning of each year and your discount rate is expected to be 8%. You will need to make payments at the end of each year for the next 20 years (also at 8%) in order to receive the annuity investment. What is the present value of the annuity investment as of...

You have been offered an investment that will pay you a lump sum of $30,000 25...

You have been offered an investment that will pay you a lump sum of $30,000 25 years from today, along with a payment of $1,000 per year for 25 years starting one year from today. How much are you willing to invest today to have this investment in your portfolio assuming you wish to earn a rate of 6 percent compounded annually?

You are offered an investment that will pay you $792, $540, $780, $1,183, $1,749, $895, $1,189,...

You are offered an investment that will pay you $792, $540, $780, $1,183, $1,749, $895, $1,189, and $1,416 over the next eight years (one cash payment per year). You require an 9.1% return on your investment. What is the most you would invest today? (In other words, what is the present value of this cash stream?) Round to the nearest cent.

Part 1. You are offered an investment which will pay you $300 in 1 year, $350...

Part 1. You are offered an investment which will pay you $300 in 1 year, $350 in 2 years, $350 in 3 years and $300 in 4 years. Your required rate of return is 9%. What is the most that you should be willing to pay for the investment? Part 2. Calculate the value of the stream of cash flows below in Year 3. t=0--->CF0 = $450 t=1--->CF1 = $550 t=2--->CF2 = $650 t=3--->CF3 = $750 t=4--->CF4 = $850 The...

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 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

Subjects