Adam buys a two-year bond with a $1000 face value and a 10% coupon rate for $1000 today. If one year later the market interest rate increases by 6% and Adam sells the bond, then his rate of return on this investment is _______%
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Adam buys a two-year bond with a $1000 face value and a 10% coupon rate for $1000 today. If one year later the market interest rate increases by 6% and Adam sells the bond, then his rate of
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- What is the definition of internal rate of return (IRR)? If you expect the annual interest rates are much different in the next 10 years, would the IRR be the ideal measure? Why or why not?If a one year discount bond that pays $1000 at maturity, is held for the entire year ,and the purchase price is $950 ,then the interest rate is... %DRAW THE CASH FLOW DIAGRAM Ashley purchased a common stock worth $5,000 every year (starting in year 1) for a period of 10 years. At the end of the 10th year, she sold all her stocks to a buyer for $80,000. Find the rate of return received on the investment.
- Betty will need $12,000 in five years to pay for a major overhaul on her tractor engine. She has found an investment that will provide a 5% return on her invested funds. How much does Betty need to invest today so she will have her overhaul funds in five years?How much money must you invest today in order to grow to a value of $45,000 in 10 years if your money grows at 5%? Your Answer: AnswerThe YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). (Round the final answers to 2 decimal places.) a. Suppose that today you buy an 9.2% annual coupon bond for $1,180. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? Expected rate of return % b-1. Two years from now, the YTM on your bond has declined by 1%, and you decide to sell. What price will your bond sell for? (Omit $ sign in your response.) Bond price $ b-2. What is the HPY on your investment? HPY %
- Suppose that $500 is invested at the end of every year for 5 years. The polynomial function that models the value of the investment is P(x) = 500x5 + 500x4 + 500x³ + 500x² + 500x, where x represents the effective interest rate plus 100%. One year after the last payment, the investment is worth $3200. Find the effective interest rate one year after the last payment, to the nearest tenth. (Note: You will need to subtract 1 from the value of x to find the effective interest rate.)You have two investments to choose from. Investment A pays an interest rate of 5% for 2 years and Investment B pays an interest rate of 2% for 5 years. Given that you have $100 to invest and can only choose from investment A or B, Which one should you choose?Suppose that Anna's college education would cost around $500,000 when they enter college in 15 years. At present, She have $100,000 to invest.What annual interest must she earn on her investment to cover the cost
- If sales are $60,000 and change in stock is 30% of sales Calculate Value of output3. You bought a fully-restored vintage Mustang convertible five years ago for $82,000. Today you have been offered $98,000 for the car. What is the Rate of Return (ROR) on your investment in the car if you sell today?Suppose that you are considering an investment, which would require you to pay $1,000 up front (today), and you would receive a payment of $100 per year, for 5 years, beginning one year from now. One year after your fifth payment, you would then have $800 paid to you as a final payment. Assume that the interest rate is equal to 5%. Round all answers to two decimal places. 5. Calculate the Present Value (PV) of the cost and each of the payments for the investment. Does this investment have a positive or negative present value? Should you make this investment? 6. How much would the initial cost ($1,000) need to change for you to be exactly indifferent about this investment? (i.e. you receive the same return for making this investment as you do for not making this investment?)