You are thinking about investing $5,022 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,615 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do?

You are thinking about investing $5,022 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,615 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are thinking about investing $4,865 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,744 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 7% for the year. What should you do? The present value of the return is $_______ (Round to the nearest cent.)
You are thinking about investing $ 4 comma 732 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $ 5 comma 678 next year. You notice that the rate for one-year Treasury bills is 1 %. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10 % for the year. What should you do?
You are thinking about investing $4,692 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,738 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 8% for the year. What should you do?.
You are thinking about investing $5,000 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,750 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? Answer: The intrinsic value of the investment in the landscaping business is $ two decimal places. No dollar sign, no comma) You (answer either "should" or "should not") invest in this landscaping business because the intrinsic value is (answer "greater" or "less") than $ (Round to (round to the nearest dollar. No dollar sign, no comma).
You are thinking about investing $4,690 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure you expect your investment to be worth $5,666 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 9% for the year. What should you do?
You are thinking about investing $5000 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure of the outcome, you expect your investment to be worth $5750 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? ..... The present value of the return is $ (Round to the nearest cent.)
You are considering a safe investment opportunity that requires a $780 investment today, and will pay $870 two years from now and another $640 five years from now. a. What is the IRR of this investment? b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain.
You are considering a safe investment opportunity that requires a $1,080 investment today, and will pay $710 two years from now and another $610 five years from now. a. What is the IRR of this investment? b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. a. What is the IRR of this investment? The IRR of this investment is _____________%. (Round to two decimal places.)
You are considering investing in a security that will pay you $4,000 in 29 years. If the appropriate discount rate is 11 percent, what is the present value of this investment? b. а. Assume these investments sell for $791 in return for which you receive $4,000 in 29 years. What is the rate of return investors earn on this investment if they buy it for $791? If the appropriate discount rate is 11 percent, the present value of this investment is $___-_(Round to the nearest cent.) а.
You are considering a safe investment opportunity that requires a $1,450 investment today, and will pay $950 two years from now and another $710 five years from now. a. What is the IRR of this investment? b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. a. What is the IRR of this investment? The IRR of this investment is %. (Round to two decimal places.)
You are considering investing in a security that will pay you $5,000 in 29 years. If the appropriate discount rate is 12 percent, what is the present value of this investment? b. Assume these investments sell for $2,423 in return for which you receive $5,000 in 29years. What is the rate of return investors earn on this investment if they buy it for $2,423? If the appropriate discount rate is 12 percent, the present value of this investment is
You are considering investing in a security that will pay you $2,000 in 35 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $275 in return for which you receive $2,000 in 35 years. What is the rate of return investors earn on this investment if they buy it for $275?

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