Question

1.

What is the rate of return on an investment if you lend $1,000 and are repaid $1,254.70 two years later?

Group of answer choices

12%

25%

6%

18%

4%

2.

At an effective interest rate of 12%, a single sum invested today will double itself in approximately:

Group of answer choices

8 years.

12 years.

6 years.

insufficient data to determine answer.

Answer #1

1) Present Value (PV) = 1000

Future Value (FV) = 1254.7

Rate of return (r) = ?

No.of years (n) = 2 years

FV = PV*(1+r)^n

1254.7 = 1000*(1+r)^2

1254.7/1000 = (1+r)^2

1.2547 = (1+r)^2

(1+r) = square root of 1.2547

1+r = 1.12

r = 1.12-1

r = 0.12 or 12%

Rate of Return = 12%

2) Amount invested today let us assume 'x'

Present Value (PV) = x

Amount will become double in the future let it be '2x'

Future value (FV) = 2x

Rate of interest (r) = 12%

FV = PV*(1+r)^n

2x = x*(1+0.12)^n

2x/x = (1.12)^n

2 = (1.12)^n

log 2 = n log 1.12

n = log 2 / log 1.12

n = 0.3010/0.0492

n = 6 years

1.
How much must be invested today to have $1,000 in two years if
the interest rate is 5%?
Group of answer choices
$909.09
$900.00
$907.00
$950.00
2.
Find the present value of $100 to be received at the end of two
years if the discount rate is 12% compounded monthly.
Group of answer choices
$66.50
$78.76
$68.80
$91.80
$79.75

What would be the internal rate return on an investment with an
initial cost of $226,485, expected annual cash flows of $45,000 and
expected annual income of $43,500 for the next 7 years? Group of
answer choices
8%
12%
9%
10%

Assuming a 25% (1/4) tax rate, what would be the real return on
investment after taxes if the nominal interest rate is 8%
Nominal Interest Rate
Inflation
Real Return After Taxes
4%
4%
8%
4%
12%
4%
16%
4%
Note: Please use whole numbers for the percent, but do not
include the % sign. It will be marked incorrect otherwise.
Example. If the answer is 25%, write 25
Group of answer choices
-1%
8%
2%
5%

17.
You want to invest an amount of money today and receive back ten
times that amount in the future. You expect to earn 12.2 percent
interest. Approximately how long must you wait for your investment
to grow ten times in value?
Group of answer choices
6 years
9 years
12 years
15 years
20 years
18.
You have $1,100 today and want to triple your money in 5 years.
What interest rate must you earn if the interest is...

Three students have each saved $1,000. Each has an investment
opportunity in which he or she can invest up to $2,000. Here are
the rates of return on the studentsâ€™ investment projects:
Student
Return
(Percent)
Tim
4
Brian
7
Crystal
15
Assume borrowing and lending is prohibited, so each student uses
only personal saving to finance his or her own investment
project.
Complete the following table with how much each student will
have a year later when the project pays...

Question 22. 1 pts
You are considering an investment that will pay $3,000 a year
for 6 years, starting one year from today. Your required rate of
return is 8.5 percent. What is the maximum amount you should pay
for this investment?
Group of answer choices
A. $13,660.76
B. $14,223.23
C. $15,060.55
D. $15,355.54
E. $17,450.20

1 As the interest rate increases, the present value of an
annuity decreases. Group of answer choices False True
2 As the number of periods N increases, the future value
of a savings account increases.
Group of answer choices
True
False
3
Forty years ago, Jordan purchased an investment for
$10,000. The investment earned 5 percent rate of return each year.
What is the worth of the investment today?
Group of answer choices
73,584.17
70,399.89
400,000.00
151,090.21

You are considering an investment opportunity with the following
costs and benefits. The applicable interest rate for this
investment opportunity is 12% (effective annual rate). Calculate
the NPV of this investment opportunity. Round your answer to two
decimals (do not include the $-sign in your answer).
Year
0
1
2
3
4
5
6
Costs
$ (10,000)
$ (5,000)
$ (1,000)
$ (1,000)
$ (1,000)
$ (1,000)
$ (1,000)
Benefits
$ -
$ -
$ 5,000
$ 7,500
$ 7,500...

What would you pay for the following investment if your
opportunity cost of risk is 4.5%? You will receive $770 today,
$1,000 in three years, $500 in six years, and after that starting
in year seven receive payments of $1,200 a year for ten years.
Approximately how long will it take to double your money if you
get a 4% annual return on your investment?
You invest $450 today in an account that will pay you 5.5% per
year. You...

You invested $ 100 on January 1 , 2007 . The investment was
worth $ 190 on July 1 , 2012 . The effective rate of return for the
first year was 12 % . Determine the annual effective rate of return
from January 1 , 2008 , to July 1 , 2012

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