4. A businessman wishes to raise P1.5 million in five years by investing a fixed amount of money every end of the year for three years. What is the required investment using an interest rate of 8%? A. P635,740 B. P547,630 C. P475,360 D. P396,134

4. A businessman wishes to raise P1.5 million in five years by investing a fixed amount of money every end of the year for three years. What is the required investment using an interest rate of 8%? A. P635,740 B. P547,630 C. P475,360 D. P396,134

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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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

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4. A businessman wishes to raise P1.5 million in five years by investing a fixed
amount of money every end of the year for three years. What is the required
investment using an interest rate of 8%?
A. P635,740
B. P547,630
C. P475,360
D. P396,134

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6. If an investor intends to double $25,000 by investing in a bank that pays 7% interest per year, determine the time it would take to double the investment.
4. If you invest $10,000 today at an interest rate of 7% for 5 years, what is the present value of your investment? A) $7,957.62 B) $8,000 C) $10,000 D) $7,632.37 Show Calculation here:
4. If an investor deposits $20,000 now, $10,000 two years from now and $5,000 per year for three years starting 4 years from now at an interest rate of 10%per year, how much can he withdraw every year forever beginning 12 years from now?
5. An investor buys a 150 TL investment fund from the bank and sells it for 165 TL after 25 days. What is the % of Annual Effective Return? 6. If the monthly (periodically) interest is 1% for a one-month deposit, what is the Annual Effective Return?
2. Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semiannually. If you make 20 consecutive semiannual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20? $57,900.83 $58,988.19 O $52,821.19 O $64,131.50 O $62,527.47
K You have just received a windfall from an investment you made in a friend's business. She will be paying you $41,444 at the end of this year, $82,888 at the end of next year, and $124,332 at the end of the year after that (three years from today). The interest rate is 3.8% per year a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?
Your brother has asked you to help him with choosing an investment. He has OMR 5000 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 4.25 percent with the interest being paid quarterly. What will be the value of the investment in two years? Select one A. 5441 OMR b. None of these c. 5341 OMR d. 5107 OMR
3. *A savings plan requires an investor to pay 10 installments, each one of $500, due at the end of every year for 10 years. One year after the last of such installments the bank will start making annual payments to the investor, each one for a fixed amount P, for n years. Assume an effective interest rate of 5% p.a. (a) If n = 7 determine the value of P. (b) If n = ∞o, i.e. payments from the bank continue indefinitely, determine the value of P.
May I ask for an explanation and solution to the question for a better understanding. Thank you! 3. If you invest P5,000 in a mutual fund extending a total annual return of 8% and you re-invest the proceeds each year, what will be the value of your investment after five years? a. P3,402.92 b. P7,346.64 c. P4,629.63 d. P5,400.00
5. a. b. C. d. e. Your investment advisor wants you to purchase an annuity that will pay you RM 25,000 per year for 10 years. If you require a 7% return, what is the most you should pay for this investment? (FVIF: 1.9672, FVIFA: 13.8164, PVIF: 0.5083, PVIFA: 7.0236) RM 241,787 RM 175, 590 RM 122,913 RM 225,682 RM 345,410
You have a chance to buy an annuity that pays RM1,000 at the beginning of each year for 5 years. You could earn 6% on your money in other investments with equal risk. What is the most you should pay for the annuity? Select one: a. RM 3,324.89 b. RM 2,854.13 c. RM 5,011.87 d. RM 4,465.11 e. RM 2,591.45
Suppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9 percent. What is the future value if the payments are made on the last day of the year? What if the payments are made on the first day of the year? a) $82,756.68; $90,204.78 b) $90,204.78; $82,756.68 c) $49,345.10; $53,786.16 d) $53,786.16; $49,345.10

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