Reading Assignment Class 5 Read the following questions. Each scenario has two choices, consider which option is rational investors' choice and which option is loss-averse investors' choice. Question 1: Suppose you make a plan to invest $50,000. You are presented with two alternatives. Which scenario would you rather have? a. Be assured that I'll get back my $50,000, at the very least even if I don't make any more money. b. Have a 50 percent chance of getting $70,000 and a 50 percent chance of getting $35,000. Question 2: Suppose you make a plan to invest $70,000. You are presented with two alternatives. Which scenario would you rather have?

Reading Assignment Class 5 Read the following questions. Each scenario has two choices, consider which option is rational investors' choice and which option is loss-averse investors' choice. Question 1: Suppose you make a plan to invest $50,000. You are presented with two alternatives. Which scenario would you rather have? a. Be assured that I'll get back my $50,000, at the very least even if I don't make any more money. b. Have a 50 percent chance of getting $70,000 and a 50 percent chance of getting $35,000. Question 2: Suppose you make a plan to invest $70,000. You are presented with two alternatives. Which scenario would you rather have?

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 11FPE

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Hide student question Issue #11: Comparison of Returns on $200000 and 5.5% on$70,000 Investors, as reasonable economic creatures commit toinvestment portfolios with the expectation of earning valuable returns. Keon as a logical investor believes his investment should provide the best value of rewards and is considering which option to invest in. The expected returns should be something similar or equal to his historical gain of 9% per annum. If Keon should leave $70,000 in the safe investment , his only expected return will be $3,850 (70,000*5.5%) in nominal terms per annum. However, if he invests the $200,000 by going entrepreneurial, Keon can potentially make a significant gain as per below. Return on Investment (ROI) ROI = Net Income * 100 Cost of Investment Cost of investment = $200, 000 Cost of 1 Limousine = 80,000 Total Cost of Limousines = (80,000*4) = 320,000 Useful Life of 1 Limousine = 20 yrs Depreciation per year = 80,000 = 4,000 20…
Plz solve both part CASE STUDY: Brian is a 22-year old university graduate having just secured a government job earning $50,000/year. He does not percieve there to be much risk to him keeping the job long into the future. In trying to make some decisions around his financial future she deliberates the following: 1) HUMAN CAPITAL - What discount rate would you use in calculating Brian's gross human capital? Please explain your reasoning for this, both on how you derived the appropriate dscount rate to be used and WHY. Hint: You will need this for answer #2 2) What is the present value of Brian's lifetime human capital, if he plans to work until age 65? Assume he gets his first paycheck at the end of his first month of work and is paid monthly.
QUESTION 7 If you have $100K, and want to invest in assets A, B and C. Asset A has historical AVG return of 15%, asset B 20%, and asset C 10%, in what proportions of $100K would you allocate into assets A, B and C? i.e. Which scenario is most rational? A > B > C A > C > B B > A > C C >A > B
Question 2 The annual worth (AW) amounts of the following independent alternatives are: $-23,000 for alternative A $-21,600 for alternative B $-27.300 for alternative C Based on these AW values and comparing with to Do nothing alternative the correct decision is to: A)select alternative A b) select alternative B C) select alternative C d) select the Do Nothing alternative
tudent question Time to preview question: 00:09:18 Seeking for accounting rate of return for Option 1, 2, & 3 (info below). The senior VP in charge has asked that you make a recommendation for the purchase of new equipment.Ideally, the company wants to limit its capital investment to $500,000. However, if an asset meritsspending more, an investment exceeding this limit may be considered. You assemble a team to helpyou. Your goal is to determine which option will result in the best investment for the company. Toencourage capital investments, the government has exempted taxes on profits from new investments.This legislation is to be in effect for the foreseeable future.The average reported operating income for the company is $1,740,000.The company uses a 10% discount rate in evaluating capital investments.The team is considering the following optionsOption 1:The asset cost is $300,000.The asset is expected to have an 8-year useful life with no salvage value.Straight-line…
Graded 1: Provide Sue with financial advice on which option has the potential to yield the highest monetary value. Support your rational with calculations using time value of money and comment on the risk return relationship for each option, assume interest rate on savings is 4% and is compounded semi-annually. Sue James is a 55-year old accountant who works at Ernst and Young (EY) who is about to retire. She has the following decision to make: Option A – Select a lump sum gratuity payment of $120,000 with a reduced pension of $1,750 per month. Option B – Select a monthly pension of $3,300 with no lump sum gratuity payment. In addition, Sue has a loan of $72,000 with loan payments of $1,200 per month for the next five years.
Congratulations. You have just won first prize in a quantitative competition. You have the following choices to receive your winnings: Option I: Receive $3,000,000 immediately. Option II: Receive five $1,000,000 payments paid every other year beginning in year T=2. For example, you receive a $1 million dollars payment in year T=2, T=4, T=6, T=8, and T=10. a. What is the present value of each option if R=0.06? Which option would you choose? b. What is the present value of each option if R=0.12? Which option would you choose? c. What interest rate R will make the present value of both options equal? Hint: use Excel’s Data – What If - Goal Seek analysis Show what you do to se up goal seek for c
Congratulations. You have just won first prize in a quantitative competition. You have the following choices to receive your winnings: Option I: Receive $3,000,000 immediately. Option II: Receive five $1,000,000 payments paid every other year beginning in year T=2. For example, you receive a $1 million dollars payment in year T=2, T=4, T=6, T=8, and T=10. a. What is the present value of each option if R=0.06? Which option would you choose? b. What is the present value of each option if R=0.12? Which option would you choose? c. What interest rate R will make the present value of both options equal? Hint: use Excel's Data - What If - Goal Seek analysis Show what you do to se up goal seek for c Also take snap shots from excel and how did you get the answers, please show work for c!!!
Congratulations. You have just won first prize in a quantitative competition. You have the following choices to receive your winnings: Option I: Receive $3,000,000 immediately. Option II: Receive five $1,000,000 payments paid every other year beginning in year T=2. For example, you receive a $1 million dollars payment in year T=2, T=4, T=6, T=8, and T=10. a. What is the present value of each option if R=0.06? Which option would you choose? b. What is the present value of each option if R=0.12? Which option would you choose? c. What interest rate R will make the present value of both options equal? Hint: use Excel’s Data – What If - Goal Seek analysis.
DO NOT USE EXCEL Harriet just inherited $50,000,000. She knows nothing about money management and has decided to educate herself in that area before making any major decisions. She has a short-term investment for that period. She has the choice between two investments:Investment A: at 6.5% compounded dailyInvestment B: at 7% compounded semi-annuallyi. Which option should she choose and why?
RISK & RETURN AND PAYOFF TABLES TUTORIAL QUESTION 1 Mr. Nel, an entrepreneur who is currently 55 years old, took early retirement from his business which he had started 30 years ago. He still wants to be involved in investments to keep his mind occupied while on “permanent” holiday. While thinking about investment opportunities, he realised that one of his most consistent expenses is his cell phone bill. He has a MTN and a separate VODACOM contract which he pays monthly. He thought to himself, “Why not invest in the company that I am contributing to on a monthly basis.” He decided to conduct research on the two entities in order to assist him with his investment decision. The following information was gathered regarding the two companies: VODACOM Vodacom is a leading African communications group providing mobile communications and related services to 40.4 million customers. Its mobile network covers calls to a total population of approximately 182 million people across five…
Q2) Your company proposes you to buy an asset for $335. The investment is very safe. You will sell off the asset in 3 years for $400. You know you could invest the 335 elsewhere at 10%. Question: b. What do you think of the proposed investment? Do you accept or refuse it?