You have two investment opportunities. The interest rate for both investments is 8%. Interest on the first investment will compound annually, while interest on the second will compound quarterly. Which investment opportunity should you choose? Why?.
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You have two investment opportunities. The interest rate for both investments is 8%. Interest on the first investment will compound annually, while interest on the second will compound quarterly. Which investment opportunity should you choose? Why?.
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- An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?May I ask for an explanation of the question for a better understanding. Thank you! Which investment will you choose from the following investment opportunities: a. A one-year investment that pays 12%, compounding annually. b. A one-year investment that pays 12%, compounding monthly. c. All the choices will provide the same future value. d. A one-year investment that pays 12%, compounding quarterly.Suppose you invest $2,000 today and receive $11,000 in five years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first one, what is the amount you will receive each year?
- Fran Smith has two investment opportunities. The interest rate for both investments is 8%. Interest on the first investment will compound annually while interest on the second will compound quarterly. Which investment opportunity should Fran choose? Why?You are comparing two investments. The first pays 3 percent interest per month, compounded monthly, and the second pays 6 percent interest per six months, compounded every six months. a. What is the effective semiannual interest rate for each investment? b. What is the effective annual interest rate for each investment? c. Based on the interest rates, which investment is preferred? Does the decision depend on whether the comparison is based on an effective six-month rate or an effective one-year rate? a. The effective semiannual interest rate for the first investment is percent. (Type an integer or decimal rounded to two decimal places as needed.)You are trying to value the following investment opportunity: The investment will cost you $5663 today. In exchange for your investment you will receive cash payments in perpetuity. The first payment will occur after one year and will be $431. Afterwards, cash payments will grow by 1.3% annually. The applicable interest rate for this investment opportunity is 7.6% (effective annual rate. Calculate the NPV of this investment opportunity.
- You are comparing two annuities. Annuity A pays $110 at the end of each year for 5 years. Annuity B pays $100 at the beginning of each year for 5 years. The rate of return on both annuities is 8 percent. Which one of the following statements is correct given this information? O Annuity B has both a higher present value and a higher future value than Annuity A. Annuity A has both a higher present value and a higher future value than Annuity B. O Annuity A has the same present value and future value as Annuity B.. Evaluate the following statement:Consider two riskless perpetuities: (i) pays $120 every year; (ii) pays $10 every month. If the rates of returns of the two perpetuities are the same, investors must buy perpetuity (ii) because it makes more interest payments.You have just received a windfall from an investment you made in a friend's business. She will be paying you $26,016 at the end of this year, $52,032 at the end of next year, and $78,048 at the end of the year after that (three years from today). The interest rate is 11.4% 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)?
- Suppose you invest $3,000 today and receive $10,000 in 25 years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? a. What is the internal rate of return (IRR) of this opportunity? The IRR of this opportunity is%. (Round to two decimal places.) b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? The periodic payment that gives the same IRR is $ (Round to the nearest cent.)You have an investment opportunity that promises to pay you $18, 499 in four years. Suppose the opportunity requires you to invest $15,813 today. What is the interest rate you would earn on this investment?An investment opportunity requires a payment of $750 for 12 years, starting a year from today. If your required rate of return is 8 percent, what is the value of the investment to you today?
