Answered: True or false. to apply the rate of…

True or false. to apply the rate of return analysis correctly, we need to classify an investment i as either simple or non-simple

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

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

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

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 2LO

See similar textbooks

Related questions

Q: - explain what would you take to compare the worthness of two different fianancial investments? how…

A: Solution- Meaning of economic Investment A Financial Investment is AN plus or instrument purchased…

Q: If markets are efficient, an investor's best investment strategy involves the correct choice of

A: This is multiple choice question, in this we explained that if Market is efficient then what's the…

Q: Explain several ways of defining the concept of rate of return on investment?

A: Return on investment is the tool that can be used to measure the performance of the companies. The…

Q: what is apr? do we use APR or EAR when we are calculating the present value of investment? is APR…

A: The term APR stands for Annual percentage rate. It reflects the amount of simple interest being owed…

Q: What are the two sources of value in an investment? Given an example of each.

A: An investment is a process where the investors gives or outlays his or her capital in return of…

Q: The excess present value method is anchored on the theory that the future returns, expressed in…

A: The excess present value method is also known as a net present value which required the present…

Q: d. Explain why NPV is considered technically superior to Payback and Accounting Rate of Return (ARR)…

A: There are various capital budgeting methods that can be used to assess or evaluate various…

Q: The desired rate of return on an investment should reflect the degree of risk involved. A. True…

A: Riskier investments may give higher returns to the investors as they provide favorable ratio of risk…

Q: The following are the reasons why investors are holding different investment despite of having…

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Which of the following methods does not consider the investment’s profitability? a. ARR b. Payback…

Q: Methods that ignore the time value of money in capital investment appraisal include which of the…

A: Net present value – Net present value is the difference between present value of cash inflows of…

Q: Explain what is meant by Accounting Rate of Return (ARR) and Net Present Value (NPV) in the context…

A: Solution:- Accounting Rate of Return (ARR):- It measures the expected profitability from any capital…

Q: While comparing investment returns is an important starting point in evaluating investment…

A: Following are the steps involved in the performance analysis of investments:Identification of the…

Q: This calculation determines profitability or growth potential of an investment, expressed as a…

A: Given: The expression of the growth potential of investment is given and to find out the point at…

Q: A particular investment's rate of return is referred to as a "return on investment.

A: In response to the question The phrase "financial market" refers to items that are often seen in the…

Q: Give an example of a liquid investment and an illiquid investment. Discuss why you consider each of…

A: In finance, the term investment represents a financial technique to allocate surplus funds into an…

Q: The most accurate way to analyze the profitability of an investment is to compute the payback…

A: Payback period is the period for time taken of project to repay the initial investment. Payback…

Q: 1. Why methods and tools of the statistics are so important in investment decision making.

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: Calculating the payback time is the most precise technique to determine the profitability of an…

A: Payback technique helps us to compute the time period in which the project's cash inflows cover the…

Q: Generally, the ____ is considered to be a more realistic reinvestment rate than the ____. a.…

A: Cost of capital is the required rate for make capital budgeting decision

Q: Evaluate the above offers using the investment evaluation techniques mention below without using…

A: MIRR or modified internal rate of return is an important capital budgeting tool. This tool is used…

Q: If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

A: False If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

Q: Discuss the pros and cons of the accounting rate of return as an investment criterion.

A: Definition: Average rate of return method: The average rate of return is the amount of income that…

Q: An NPV analysis is one part of a complete captial investment analysis. What is the second part that…

A: Introduction: An analysis of capital investment is the mechanism by which management prepares,…

Q: What do you mean by rate of return on the investment?

A: What do you mean by rate of return on the investment?

Q: When npv is negative, the discount rate is greater than the actual return on investment. A.…

A: Net present value is the method used in capital budgeting to analyse various investments, projects,…

Q: Whenever you make an investment decision, you need to consider its impacts on the diversification of…

A: Investment decision and diversification go hand in hand. One should be careful while making an…

Q: The expected value of an investment: Answer a. Is what the owner will receive when the investment is…

A: Expected Return refers to return anticipated by an investor while making investment. It may differ…

Q: The interest rate is the IRR for the mixed investment. True or false?

A: Project Balance (PB) is the amount of investment that is made into a project at any given period of…

Q: Investment returns can take two forms: state and explain each

A: Investment returns can take two forms - they are stated and explained below.

Q: Explain the difference between return of investment versus return on investment.

A: The ratio analysis helps to analyze the financial statements of the business.

Q: The value of an investment can be defined in numerous ways. Which is FALSE? a. It is the value…

A: There are many different types valuation method of the investment some depends on the cash flow or…

Q: Which of the following methods does not consider the investment’s profitability? ARR Payback NPV…

A: Average rate of return (ARR) and Internal rate of return (IRR) are methods of computing rate of…

Q: ith the use of an example, briefly explain the main difference between the ex-ante and the ex-post…

A: Main Difference between ex-ante and the ex-post opportunity cost of capital: Ex-post risk is…

Q: Speculation tends to have a high risk and high rate of return compared to investment Select one: O…

A: The main target in both the cases are making profit, however there are major differences between the…

Q: “Explain the reasons why the net present value (NPV) method of investment appraisal is likely to be…

A: The Net Present Value (NPV) is a company's financial tool used to estimate the viability of…

Q: Differentiate between Simple and Nonsimple Investments?

A: Simple investment: Simple investment is a type of investment in which the investment sign will…

Q: If net present values are used to evaluate two investments that have equal costs and equal total…

A: Net Present Value is determined by discounting net cash flows by an appropriate required rate of…

Q: A realized return is the rate of return actually earned on an investment. Group of answer choices…

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: When comparing the performance of two investment alternatives, which characteristics of investments…

A: For comparison any investment alternative main thing required for Cashflow and certainty of cash and…

Q: If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR,…

A: MARR is the minimum return the management requires from a project after adjusting the risks and…

Q: 1. Define the components of holding period return. Can any of these components be negative? 2. How…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: How important is risk to returns?

A: “Since you have asked multiple questions, we will solve the first question for you. If youwant any…

Q: The third step for making a capital investment decision is to establish baseline criteria for…

A: In order to establish baseline criteria for alternatives for making capital budgeting decisions, the…

Q: Identify the one true statement. a. The B/C method determines the ratio of the present worth of…

A: Capital Budgeting involves long-term planning and monitoring of capital expenditure, besides…

Q: nually. Investors required rate of return is ce

A: Coupon rate =8.47% T=7 Face value=50,000 Price=45,000 Yield to maturity = C +(face value…

Q: 1.What is the relationship between an investment’s risk and its return? Please provide examples if…

A: Note: As per our policy, we only answer one question, when more than one question is posted. The…

Question

1. True or false. to apply the rate of return analysis correctly, we need to classify an investment i as either simple or non-simple

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction :

VIEW

Step 2: Answer :

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

How does the size of the initial investment affect the internal rate of return on the net present value models?
The third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion? A. payback method B. accounting rate of return C. internal rate of return D. inventory turnover
A realized return is the rate of return actually earned on an investment. Group of answer choices True False
Which of the following methods does not consider the investment’s profitability? a. ARR b. Payback c. NPV d. IRR
Explain what is meant by Accounting Rate of Return (ARR) and Net Present Value (NPV) in the context of investment appraisal. Discuss at least TWO advantages and TWO disadvantages of each method.
Which of the following methods does not consider the investment’s profitability? ARR Payback NPV IRR
1. Define the components of holding period return. Can any of these components be negative? 2. How do you understand an investment risk and what statistic tools can be used to measure it?
Discuss the pros and cons of the accounting rate of return as an investment criterion.
Explain the three different ways in which the relationship between risk and required rate of return of an investment can change
(b) Explain the relationship between net present value and internal rate of return, and show how they may offer complementary methods for evaluating investments.
If the internal rate of return (IRR) is less than the cost of capital, then the investment is acceptable. Group of answer choices True False
How do an investment's required rate of return vary with perceived risk? Explain with an example?