11 Fun with IRR. Suppose you have just graduated from college and are deciding on a career. Your four career options, along with your salary in each of the four earning periods, are displayed in Table 5.3. Assume that any career will only last four periods before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Осcupation Period 0 Period 1 Period 2 Period 3 Ophthalmologist -5 1 10 12 Accountant 4 Starving artist 1 1 1 1 Sports superstar 15 0. Assume your discount factor 8 =0.95. Interpret this assumption. a b Find the value of the interest rate r that corresponds to your discount factor. c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal- mologist and of becoming an accountant. Which career do you prefer?

11 Fun with IRR. Suppose you have just graduated from college and are deciding on a career. Your four career options, along with your salary in each of the four earning periods, are displayed in Table 5.3. Assume that any career will only last four periods before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Осcupation Period 0 Period 1 Period 2 Period 3 Ophthalmologist -5 1 10 12 Accountant 4 Starving artist 1 1 1 1 Sports superstar 15 0. Assume your discount factor 8 =0.95. Interpret this assumption. a b Find the value of the interest rate r that corresponds to your discount factor. c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal- mologist and of becoming an accountant. Which career do you prefer?

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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uppose that you are in the fall of your senior year and are faced with the choice of either getting a job when you graduate or going to law school. Of course, your choice is not purely financial. However, to make an informed decision you would like to know the financial implications of the two alternatives. Let's assume that your alternatives are as follows: If you take the "get a job" route you expect to start off with a salary of $45,000 per year. There is no way to predict what will happen in the future, your best guess is that your salary will grow at 5 percent per year until you retire in 43 years. As a law student, you will be paying $20,000 per year tuition for each of the 3 years you are in graduate school. However, you can then expect a job with a starting salary of $75,000 per year. Moreover, you expect your salary to grow by 8 percent per year until you retire 36 years later. Clearly, your total expected lifetime salary will be higher if you become a…
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Problem Solving: Answer the problem. Write your complete solutions and conclusions. 1. Alfred is a bachelor with a stable job. He is thinking of his future plans and one of his goal is to have an investment of ₱1,000,000 after five years. The amount to be invested will earn an interest of 12% compounded quarterly. Determine the amount to be invested by Alfred at 12% interest compounded quarterly.

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