3. Suppose a hedge fund earns 5% per quarter every quarter. a. What is the EAR...
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3. Suppose a hedge fund earns 5% per quarter every quarter. a. What is the EAR on an investment in this fund? b. If you need $1 million dollars in 3 years, how much do you have to invest in the fund today? c. If you invest $1 million today, how much money will you have in 3 years? d. If you invest $10,000 every quarter for 12 quarters, starting immediately (i.e., first investment at time 0, last investment 11 quarters from now), how much will you have at the end of 3 years? e. If you need $1 million dollars in 5 years, and you are going to invest the same amount every quarter for 12 quarters, starting in 1 year (i.e., the first investment is at the end of year 1, the last investment is at the end of the third quarter/beginning of the fourth quarter of year 4) how much do you have to invest? f. If you invest today, how long will it take to quadruple your money? 3. Suppose a hedge fund earns 5% per quarter every quarter. a. What is the EAR on an investment in this fund? b. If you need $1 million dollars in 3 years, how much do you have to invest in the fund today? c. If you invest $1 million today, how much money will you have in 3 years? d. If you invest $10,000 every quarter for 12 quarters, starting immediately (i.e., first investment at time 0, last investment 11 quarters from now), how much will you have at the end of 3 years? e. If you need $1 million dollars in 5 years, and you are going to invest the same amount every quarter for 12 quarters, starting in 1 year (i.e., the first investment is at the end of year 1, the last investment is at the end of the third quarter/beginning of the fourth quarter of year 4) how much do you have to invest? f. If you invest today, how long will it take to quadruple your money?
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Answer rating: 100% (QA)
a To calculate the Effective Annual Rate EAR on an investment with a quarterly interest rate of 5 we can use the formula EAR 1 Quarterly interest rate4 1 Quarterly interest rate 5 005 EAR 1 0054 1 121... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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