DeVry BUSN 379 Week 2 Homework – Updated
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Homework
(graded)
Please complete the following exercises from Chapters 4 and
5 of your textbook and post them in the Dropbox.
Chapter 4: 8, 17, and 18
Chapter 5: 1, 4, and 12
@) Calculating the Number of Periods. Calculating Rates of
Return. In 2011, an 1880-O Morgan silver dollar sold for $13,113. What was the
rate of return on this investment?
Problem 17
Calculating Present Values. Suppose you are still committed
to owning a $150,000 Ferrari (see Question 9). If you believe your mutual fund
can achieve a 10.25 percent annual rate of return, and you want to buy the car
in 10 years on the day you turn 30, how much must you invest today?
18)
Calculating Future Values. You have just made your first
$5,000 contribution to your individual retirement account. Assuming you earn a
10.1 percent rate of return and make no additional contributions, what will
your account be worth when you retire in 45 years? What if you wait 10 years
before contributing? (Does this suggest an investment strategy?)
Chapter 5: 1, 4, and 12
Present Value and Multiple Cash Flows. Rooster Co. has
identified an investment project with the following cash flows. If the discount
rate is 10 percent, what is the present value of these cash flows? What is the
present value at 18 percent? At 24 percent?
Year Cash Flow
1 $ 830
2 610
3 1,140
4 1,390
2)
Calculating Annuity Present Values. An investment offers
$6,700 per year for 15 years, with the first payment occurring 1 year from now.
If the required return is 8 percent, what is the value of the investment? What
would the value be if the payments occurred for 40 years? For 75 years?
Forever?
3)
Calculating EAR. Find the EAR in each of the following
cases:
figure
Stated Rate (APR) Number of Times Compounded Effective Rate (EAR)
10% Quarterly
17 Monthly
13 Daily
9 Semiannually
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