Finding nominal rate of return Suppose the effective annual interest rate on some investment is 8.45% a. What is the stated rate per month? b. Suppose you decide to kick your Starbucks habit to save money. Currently you spend $125.00 per month (about $4 per day) on Starbucks coffee. Without considering the sime value of money and assuming Starbucks prices remain steady, how much will you spend at Starbucks over the next 45 years assuming no change in your monthly spending? c. Now suppose you invest the $125.00 monthly in an account that ears an effective annual return of 6.45%. How much money will you accumulate over 45 years using the funds that you previously spent at Starbucks? Note assume your first monthly deposit occurs one month from now, a. The stated rate per month is % (Round to five decimal places) RITE

Finding nominal rate of return Suppose the effective annual interest rate on some investment is 8.45% a. What is the stated rate per month? b. Suppose you decide to kick your Starbucks habit to save money. Currently you spend $125.00 per month (about $4 per day) on Starbucks coffee. Without considering the sime value of money and assuming Starbucks prices remain steady, how much will you spend at Starbucks over the next 45 years assuming no change in your monthly spending? c. Now suppose you invest the $125.00 monthly in an account that ears an effective annual return of 6.45%. How much money will you accumulate over 45 years using the funds that you previously spent at Starbucks? Note assume your first monthly deposit occurs one month from now, a. The stated rate per month is % (Round to five decimal places) RITE

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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show all excel formulas/ work answering the following: Computing EAR and APR 1 Suppose you can earn 1% per month on $1 invested today. What is the APR? How much are you effectively earning? Suppose if you put it in another account, you earn 3% per quarter. What is the APR? How much are you effectively earning? Future Values with Monthly Compounding Suppose you deposit $50 a month into an account that has an APR of 9%, based on monthly compounding. How much will you have in the account in 35 years? Present Value with Daily Compounding You need $15,000 in 3 years for a new car. If you can deposit money into an account that pays an APR of 5.5% based on daily compounding, how much would you need to deposit?
Calculating Rates of Return Suppose an investment offers to quadruple your money in12 months (don’t believe it). What rate of return per quarter are you being offered?
Using the BA II Plus how do I find the solution to The Humpty Dumpty Food Store will be setting aside 35,000 each quarter starting next quarter, for the next four years. How much money will the firm have in four years if it can earn 6.25 % on its savings?
BUILDING CREDIT COST INTO PRICES Your firm sells for cash only, but it is thinking of offering credit, allowing customers 90 days to pay. Customers understand the time value of money, so they would all wait and pay on the 90th day. To carry these receivables, you would have to borrow funds from your bank at a nominal 9%, daily compounding based on a 360-day year. You want to increase your base prices by exactly enough to offset your bank interest cost. To the closest whole percentage point, by how much should you raise your product prices?
The price of a car you want is $36,000 today. Its price is expected to increase by $1000 each year. You now have $22,000 in an investment account, which is earning 8% per year. How many years will it be before you have enough to buy the car without borrowing any money? (Use Goal Seek to determine the time taken.) The time taken is determined to be..... years.
Upon graduating from college this year you expect to earn $25,000 per year. If you get your MBA, in one year you can expect to start at $35,000 per year. Over the year, inflation is expected to be 5%. In today's dollars, how much additional (less) money will you make from getting your MBA (to the nearest dollar) in your first year? A. $8,750 B. $8,333 C. $10,000 D. $9,524
Carla Vista Design has daily sales of $54,000. The financial management team has determined that a lockbox would reduce the collection time by 1.7 days. Assuming the company can earn 4.1 percent interest per year, what are the savings from the lockbox? (Round answer to 2 decimal places, e.g. 12.25.) what is the Savings from the lockbox per year?
Assume you are thinking about starting a business and would like to forecast your cash needs for the next six months. You expect sales to be approximately $30,000 per month for the first 12 months and your purchases to support sales will be approximately 60% of sales. You anticipate about 20% of your sales will be cash and 80% collected the following month. Your supplier has agreed to extend credit for 70 days at no cost (i.e. you will pay your bills on a two month lag). Your monthly expenses for rent, wages, utilities, and so forth will be approximately $3,500 per month. You have deposited $15,000 in a checking account to begin your operations and would like to maintain a minimum balance of $5,000 in that account. 1. Explain the purpose of creating budgets and how your budget will help the business remain capitalized 2 . Will you need additional funds at some point? Justify your answer. 3. How would you raise capital in the future?
You just bought a $900,000 house in Philly. You financed your purchase with a loan. Assume that houses in Inland Empire increase at the rate of 5.30 percent a year. Your downpayment rate at the time of house purchase was 40 percent. (a) The expected appreciation rate on home price next year equals ______ percent. (Round to two decimal places. (b) The expected rate of appreciation on your home equity next year equals # ____% (c) TRUE OR FALSE? The lower the loan-to-value ratio, the higher the rate of appreciation on your home equity next year. This statement is _____
Solving for Rates What annual rate of return is earned on a $3,300 investment when it grows to $7,100 in nineteen years?
Interest rate (with changing years). Keiko is looking at the following investment choices and wants to know what annual rate of return each choice produces. a. Invest $400.00 and receive $790.15 in 9 years. b. Invest $3,600.00 and receive $11,432.56 in 16 years. c. Invest $30,118.98 and receive $100,000.00 in 20 years. d. Invest $34,767.89 and receive $1,100,000.00 in 35 years.
Suppose you have an account that will grow to $253,000.00 in 25 years. It grows at 7.5% annual interest, compounded monthly, under the current investment strategy. The owner of the account, however, wants it to have $368,000.00 after 25 years. How much additional monthly contribution should they make to meet their goal?

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