Suppose you are still committed to owning a $190,000 Ferrari (see Problem 9). If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?
Answer to relevant QuestionsYou expect to receive $15,000 at graduation in two years. You plan on investing it at 11 percent until you have $85,000. How long will you wait from now?Investment X offers to pay you $5,200 per year for eight years, whereas Investment Y offers to pay you $7,300 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 ...Dinero Bank offers you a $60,000, five-year term loan at 7.5 percent annual interest. What will your annual loan payment be?An investment will pay you $43,000 in 10 years. If the appropriate discount rate is 7 percent compounded daily, what is the present value?You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $600,000 per year. Thus, in one year, you receive $1.6 million. In two years, you get $2.2 million, and so on. ...
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