3.1 Suppose Alex wants to save money to go for a holiday in three years' time. He needs R8 000 for his holiday. He has three options for saving his money: Option A: At 10% per annum simple interest Option B: At 3.25% compounded quarterly Option C: At 7.5% per annual interest compounded monthly a. Calculate the value of P for options A, B and C. nt A = P(1+2) "² b. Which option will allow Alex to save the least amount of money presently so he can still enjoy his planned holiday in three years' time?

3.1 Suppose Alex wants to save money to go for a holiday in three years' time. He needs R8 000 for his holiday. He has three options for saving his money: Option A: At 10% per annum simple interest Option B: At 3.25% compounded quarterly Option C: At 7.5% per annual interest compounded monthly a. Calculate the value of P for options A, B and C. nt A = P(1+2) "² b. Which option will allow Alex to save the least amount of money presently so he can still enjoy his planned holiday in three years' time?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have a choice between receiving $550 now or $570 in six months' time. Current interest rates are 10% p.a. (simple interest). a) As a rational investor, which option would you choose, and why? b) Calculate the minimum interest rate p.a. that would reverse your choice above.
You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.a) Explain the time value of money principleb) Identify the underlying assumption of the time value of money principlec) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.d) Suggest how you can minimize the amount of cash you must invest in order to reach your retirement goal.e) Compute the amount you will have at the end of the 45 years.f) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.
If you deposit OMR 5000 in your account in a bank; if your bank pays 9.05% interest, how much will you get in 15 years? Find future value Select one: a. None of the option b. 18212.41 c. 18833.31 d. 18212.14 e. 18338.13
Suppose you are given two loan options. The first one allows you to borrow money at 8.6% per year, compounded semi-annually. The other option allows you to borrow at 8.4% per year but compounded monthly. Calculate & explain which option is better from the borrower’s point of view. What is your conclusion from the answers ?
If you deposit OMR 19500 in your account in a bank; suppose the bank pays 16.15% compound interest monthly. Calculate future value of your money in 5 years. Select one: a. 49376.99 b. None of the option c. 216319.80 d. 219545.18 e. 219554.81
b. Suppose that you are given two options to choose. Offer A offers you a monthly payment of $10,000 per year for 10 years (paid annually at the beginning of each year) or a lump sum of $x now. Determine the minimum value of x that would induce you to accept the lump sum given the current market interest rate of 5%.
Suppose you're offered the following two accounts to invest $10,000 for 5 years: 11% simple interest and 6% interest compounded monthly. Which is the best choice? Part: 0 / 3 Part 1 of 3 The future value of $10,000 using 11% simple interest is $ X Ś Round your answer to the nearest cent. Do not round any intermediate steps.
Suppose you are offered an investment that will allow you to double your money in 9years. You have R20 000 to invest. What is the implied rate of interest?
You have a choice between receiving $500 now and $530 in six months' time. Current interest rates are 10% p.a. (simple interest). As a rational investor, which option would you choose and why?
Which is the better option if the interest rate is r=0.07 (r=7%)? Show all work used to arrive at your answer. a. Option I: Receive $510 today at time t=0. b. Option II: Receive $1000 at time t=10. Show work on both options!
You will deposit $30,000 per year into an account beginning today that pays 13 percent per year. How long (in years) would it take for you want have a total of $1,000,000 at retirement? m Nper (or N) =n*m Rate (or I/Y)=i/m PV PMT FV Must identify variables and use excel
Answer the two questions please 1- You are planning to withdraw $100 in Year 1, $150in Year 3, and $200 in Year 5. At a 5% interest rate, what is the present worth of these withdrawals? 2-If you plan to invest EOY 2 $4000, then what would this be equivalent to EOY 4 years? Assume i = 6%.

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