You are given three investment options. Option A offers an immediate payment of $1,000. Option B offers a payment of $1,500 two years from now. Option C offers a paymentof $2,500 five years from now. Assuming an interest rate of 10 percent. Rank the options in terms of their present value, from highest to lowest (from the list below by draggingthem around).1Option C2⠀⠀Option A3Option B

The objective of this question is to rank three investment options based on their present value. The…

Answered: You are given three investment options.…

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 1WNG

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Consider a $1200 bond that makes $30 annual coupon payments. If the interest rate is 2 percent and the bond matures in two years, what is the bond's present value? Carefully follow all mathematical instructions. Round intermediate steps to four decimal places and your final answer to two decimal places.
You are offered an investment that will pay you GH¢ 200 in one year, GH¢ 400 the next year, GH¢ 600 the next year and GH¢ 800 at the end of the next year. You can earn 12 percent on very similar investments. What is the most you should pay for this one?
The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following year. What is present value of $1,000 to be received in two years? The present value of $1,000 to be received in two years is $____ Answer to 2 decimal places Thanks!
Q) A star baseball player signs a contract that would pay a total of $16 million. The player receives $4 million upon signing, and $3 million every year for the next four years. (In other words, the player will receive $4 million today, $3 million in a year from today, etc.)At an interest rate of 4 percent, the sum of the present value of the contract is $__. Your answer should be a whole number. If the contract is spread over fewer years, the present value of the contract would __________ (options: increase or decrease)
The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following year. What is the present value of $1,000 to be received next year? What is the present value of $1,000 tobe received in two years? The present value of $1,000 to be received next year is $ ____. >>>>Answer to 2 decimal places.
Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. (a) What would you expect the price of the stock to be if it were priced according to its present value? (b) What happens to the price of the stock if the discount rate falls to 2%? (c) Now suppose you expect the dividend to grow by 1.5% every year, such that it will be $10.15 next vear. $10.30 the year after that, and so on. What are the new prices of the stock with 5% and 2% discount rates?
A semiannual payment bond with a $1,000 par has a 7 percent quoted coupon rate, a 7 percent promised YTM, and 10 years to maturity. What is the bond's duration? If interest rates are expected to rise by one half of a percent, by how much would you expect the price to change using the modified duration equation? How much would you expect the price to change using convexity? You need to use the bond duration and convexity calculator to answer this question.
Please do your own work, don't copy from the internet Q2) 2, You invest $3,000 for three years at 12 percent. a. What is the value of your investment after one year? Multiply $3,000 × 1.12. b. What is the value of your investment after two years? Multiply your answer to part a by 1.12. c. What is the value of your investment after three years? Multiply your answer to part b by 1.12. This gives your final answer. Combine these three steps by using the formula to find the future value of $3,000 in 3 years at 12 percent interest.
Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent what is the value of the bond? What would happen to the bonds' value if inflation fell, by 3 %? Would we now have a premium or a discount bond?

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