Question
Aaliyah invests $5,000 in a 10 year, zero-coupon bond that pays 7.17735% interest, compounded annually. What is the maturity (future) value, rounded to the nearest
Aaliyah invests $5,000 in a 10 year, zero-coupon bond that pays 7.17735% interest, compounded annually.
- What is the maturity (future) value, rounded to the nearest $0.01?
- How much interest did she earn? Share your math
- And/or: How much total interest is earned on the original deposit (excluding interest earned on interest)?*
- Optional: What is her holding period return?
- Optional: Include a cash flow diagram
B-Scenario: You invest $1M in a private equity investment. In year 1, the fund "calls" (demands) an additional $250,000. In years 3, 4, 5,...,9 you get dividends of $100,000. In year 10, you exit the investment, withdrawing $5M. Your opportunity cost of money is 8%.
- Sketch the cash flow diagram by hand or in PowerPoint. and include all the relevant information.
- Optional: What is the HPR in dollars and percent?
- Optional: Is this a good investment? Explain.
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Get StartedRecommended Textbook for
Essentials of Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
10th edition
77835425, 978-0077835422
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