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2.f How long will it take for an investment of $5,000 to grow $7,500,
if it earns 10% simple interest per year? include a cash flow
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- Compute the rate of return on the $40,000 investment that yields a recurring benefit of $5,000 every other year starting 1 year from now and a benefit of $2,500 every other year starting 2 years from now. (ANS: 9.52%) How to solve this?The Turners have 10 years to save a lump-sum amount for their child’s college education. Today a four-year college education costs $75,000, and this is expected to increase by10%per year into the foreseeable future. a. If the Turners can earn 6% per year on a conservative investment in a highly rated taxfree municipal bond, how much money must they save each year for the next 10 years to afford to send their child to college? b. If a certain college will “freeze” the cost of education in 10 years for a lump-sum of current value $150,000, is this a good deal?2. Which is more desirable: investing $2000 at 6% peryear compound interest for three years, or investing$2000 at 7% per year simple interest for three years? please include a cashflow(not excel)
- 2. Nathan and Stephanie are saving for their daughter's college education. Their daughter, Paige, is now 8 years old and will be entering college 10 years from now (t = 10). College tuition and expenses at State U. are currently $16,000 a year and are expected to increase at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to graduate school, she's on her own). Tuition and other costs will be due at the beginning of each school year (at t = 10, 11, 12, and 13). So far, Nathan and Stephanie have built up $9,000 in the college savings account. Their long-run financial plan is to contribute $3,000 a year at the beginning of each of the next five years (at t = 0, 1, 2, 3, and 4). Then they plan to make 6 equal annual contributions at the end of each of the following 6 years (t = 5, 6, 7, 8, 9, and 10). Their investment account is expected to earn 8%. How large must the annual payments be in the subsequent 6 years (t = 5, 6, 7, 8, 9, and 10) to meet their…A company invests $6,250 at the beginning ofa seven-year project. At the end of every year forthe first five years, the project generates $1,550. Atthe end of the sixth year, the project generates nomoney. At the end of the seventh year, the project isterminated. How much must the project generate atthe end of the seventh year to realize 14% return onthe initial investment?# 5- According to the cash flow diagram below, for the case where the cost of capital is 25%; Calculate the present (P), the end of the 5th year (F) and the annual equivalent (A) value of money
- Suppose that Anna's college education would cost around $500,000 when they enter college in 15 years. At present, She have $100,000 to invest.What annual interest must she earn on her investment to cover the cost2. a What is the annual rate of simple interest if $265 is earned in fourmonths on an investment of $15,000? include a cash flowAfter learning about finances in grade eleven, you decide to put money where your mouth is and at the end of every month invest $100 into the stock market for the next 48 years. Assuming the market returns 8% per annum, compounded monthly, how much will you have after 48 years?
- A 10,000 Par Disney bond has a 4% coupon and will mature in 10 years. If its yielding (YTM) 5% when you buy it, and in 2.38 years you sell it when its yielding 4% what will be your sale proceeds (how much $$ will you get when you sell it? I'm not looking for your profit?4. If a certain machine undergoes a major overhaul now, its output can be increased by 20%, which translates into additional cash flow of P20,000 at the end of each year for 5 years. If i = 15% per year, how much can we afford now to invest to overhaul this machine? (5 pts) (Show the Cash flow diagram and your solutions).A 10-year government coupon bond has a face value of $1,000 and a coupon rate of 5% paid annually. Assume that the interest rate is 6% per year. What is the bond’s PV? (You can sum the PVs for each of the coupon payments and the final $1,000, or you can use the annuity formula in the text (at p. 103) to save some work.)
