If intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?
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If intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?
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- Which investment criteria answers the question: "How quickly do we recover our investment, in nominal dollars?" A) net present value B) internal rate of return C) profitability index D) payback periodSo if the Return = (Total Dividend + change in market price ) / purchase Price, then why is the annual return not calculated that way??Which of the following denotes the duration till which the investor has to wait for the break even? Options:- Profitability period - Wait time- Payback Period- Net Present Value
- What is the formula for the following: Payback period. Net Present Value Internal Rate of return Rate of ReturnWhy do we discount the future in valuing investments today that are expected to provide returns in the future? Explain with examples. Define & explain Annual Percentage Rate (APR) & the Effective Annual Rate (EAR). What is the relationship between APR & EAR? The discounting of the future is assumed to be exponential. What does behavioral finance have to say about this assumption? What is hyperbolic discounting?When computing an interest or growth rate, the rate will increase the smaller the future value, holding present value and the number of periods constant. Is this true or false?
- This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodThis is part a) question and it's answer in order to answer part b) question Question: You hold a consol that pays a coupon C in perpetuity. The current interest rate is i, and the average expectation in the market is that this will remain unchanged. What will be the price of the consol today? answer : According to the question we need to calculate the current price of the perpetual consol. Perpetual consoles are priced differently because their expected income is spread through an indefinite period. So, perpetual consoles are priced using the current yield. The current yield is calculated as:- coupon amountMarket price×100coupon amountMarket price×100 After calculating the current yield price is calculated by the above formula where, i = Current interest rate y = yield so, the price of this consol will be Price = i/y I please need the solutions for part b) question b) In the next period however, the interest rate changes unexpectedly to i . What is the new price of the bond? If…Give an example on annual rate of return method and solve it
- What is the present value of the following cash flow streams at an interest rate of 6.25%? Which cash flow (top or bottom) is better and why from an investment standpoint?The annual growth rate of your investment can be measured by A. THE ANNUAL MEAN OF YOUR ANNUAL RETURN B. THE MAXIMUM RETURN MINUS MINUMUM RETURN C. THE ANNUAL GEOMOETRIC MEAN OF YOUR RETURN D. ALL OF THE ABOVEIf the annual increase in the cost to sell is higher than the required rate of return of the investor, then it is better to invest in the asset for as long as possible. True or False?