Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I tried to solve it, but would be really helpful to actually know the correct answers. Assume interest is not compounded. An investment of 1,000,

image text in transcribed

I tried to solve it, but would be really helpful to actually know the correct answers. image text in transcribed

Assume interest is not compounded. An investment of 1,000, at the end of three years, at an annual rate of 5%, has a future value of: a) b) c) d) 1,015 1,150 1,157.625 3,150 Which of the following interest rates, when applied to n investment of $200, will produce proceeds (future value) of $220 in two years? a) b) c) d) 10%, simple interest 5%, compounded annually 4.82%, compounded semi-annually 2.41%, compounded quarterly An investment pays 106 in one year. If 5% is the interest (discount) rate, the investment's present value is: a) 100 b) 100.9524 c) 101 Company ABC needs to raise funds. A broker calls you, saying that ABC wants to pay investors $100 million in one year plus an additional $200 million in two years. If 5% is the relevant interest (discount) rate for one-year cash flow and 6% is the relevant rate for two-year cash flow, what should you pay for this investment? a) b) c) d) $184,237,739 $273,237,383 $283,917.341 $300,000,000 Consider an investment which promises to pay a cash flow of $1,000 at a specific future date. An increase in which of the following will cause the investment's present value to decline? There may be more than one. a) b) c) d) The futurity of the cash flow The price of the investment The interest rate used to discount the cash flow None of the above Which of the following statement(s) is(are) true? There may be more than one. a) An investment of $1,000 for five years at 3% produces greater proceeds (future value) the same investment for three years at 5%, if interest is compounded. b) An investment of $1,000 for five years at 3% produces lower proceeds (future value) the same investment for three years at 5%, if interest is compounded. c) An investment of $1,000 for five years at 3% produces the same proceeds (future value) the same investment for three years at 5%, if interest is compounded. d) An investment of $1,000 for five years at 3% produces greater proceeds (future value) the same investment for three years at 5%, if interest is simple. e) An investment of $1,000 for five years at 3% produces lower proceeds (future value) the same investment for three years at 5%, if interest is simple. f) An investment of $1,000 for five years at 3% produces the same proceeds (future value) the same investment for three years at 5%, if interest is simple. You want to produce a future value of $10,000 two years from now. A banks pays 4% interest at a compound annual rate. A second bank pays 4%, but at simple interest. Do you need to deposit more, less or the same amount with the second bank compared to the first? a) More b) Less c) Same A U.S. bank pays 2.25% interest on deposits. You deposit $5,000 for two months beginning today. What are the proceeds? a) b) c) d) $5,018.7500 $5,018.8014 $5,019.0625 $5,112.5000 Consider a cash flow of 100 to be paid in four years. Assuming interest rates are not zero, what can you say about its present value? There may be more than one. Choose all correct answers for full credit. Partial credit is given. a) b) c) d) >0 100 0 b) 100 d)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Theory and Practice

Authors: Eugene F. Brigham, Michael C. Ehrhardt

16th edition

1337902608, 978-1337902601

More Books

Students also viewed these Finance questions