Question

You read the following add in Fresno Bee: An investment company is offering you the following opportunity for investing: Invest $1000 each year for 10 years with us, and then after that we will give $1000 for life/. Does age matter?

Answer #1

Yes, higher the age, lesser will be the annuity that the Copany has to pay

Consider a person who is 20 years old, he will invest $1000 per year for 10 years. Assuming an expected age of 90, He will get $1000 for 60 years

If there is another person who is 60 years old, he will invest $1000 per year for 10 years. Assuming an expected age of 90, He will get $1000 for only 20 years. This means he will get a lesser amount and the company will benefit more in this case.

. I am offering each of you a choice:
A nominal return of 7% on your investment if you invest in
US
A nominal return of 6% on you investment if you invest in
Ireland.
Which option will give you the highest real rate of return?
(Calculate the average inflation for the last 5 years for each
country and use that to calculate the real rate of return.
Inflation rate can be found online). (5 PTS)

You are presented with an investment opportunity that will give
you the following stream of cash flows: nothing for the next 5
years; starting at the following year, an amount of $2,000 per year
until year 13; and after that year, then an amount of $10,000 per
year until year 22. If your required rate of return (APR) is 10%
compounded annually, what is the present value today of these cash
flows?

You are presented with an investment opportunity that will give
you the following stream of cash flows: nothing for the next 3
years; starting at the following year, an amount of $5,000 per year
until year 10; and after that year, then an amount of $7,000 per
year until year 23. If your required rate of return (APR) is 9%
compounded annually, what is the future value at the end of year 23
of these cash flows?
Please include excel...

You are endowed with $5,000 of after-tax cash and 20-year
investment horizon. You have a marginal tax rate of 40% and you
expect to face the same rate over the next 20 years. You expect
that investing passively in an index fund will generate a 10%
return each year, pretax, for the next 20 years
The future value of a $1 investment
for 20 periods is as follows:
R
Factor
6%
3.207
8%
4.661
10%
6.728...

Q1.
An investment company offers you an annuity of $20,000 per year
for the next 10 years. The interest rate is 10%. How much would you
be willing to pay for the annuity?
Q2.
You have $100,000 to invest now and would also like to invest
$6,000 for each of the next five years in an investment which
returns 8% per year. With annual compounding, how much will your
investment be worth in 5 years?

5.
You run a construction company and you have just won a contract to
build a government building. Construction currently costs $10
million and will cost $5 million a year later. The government will
pay $20 million after the building is completed a year later.
Assume the cost of capital is 10%.
a. What is the NPV of this business opportunity?
b. How could your company convert the NPV of this
business into current cash?
7. Marian Plunket has her...

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...

Baldwin Enterprises is considering investing in one of
two capital investment opportunities and you have been asked to
evaluate the two alternatives. The first investment opportunity
costs $170,400 and will provide additional revenues of $35,000 for
the next 7 years. The second investment opportunity costs $187,900
and will result in cost savings of $28,000 per year for the next 10
years.
Required:
What is the internal rate of return for each capital
investment opportunity to the nearest whole
percentage?
Which...

Problem 6:
You have an investment horizon of 10 years. Which of the
following has more interest rate risk?
(1) Invest in a 12-year zero and sell it after 10 years.
(2) invest in a 10-year sequence of 1-year zeros (when one
1-year zero matures, roll the money over into the next one-year
zero, for 10 years).
Explain your answer.

You are the financial manager of a large company and you must
recommend the best investment to the board of directors.
1- (30 points) If the firm wants to invest 100,000 €, which of
the following options is the most interesting one:
a) To invest in a bank account that offers an annual simple
interest rate of 7%, for 10 years
b) To invest in a bank account that offers an annual compound
interest rate of 6%, for 10 years...

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