(a) An investor is considering the purchase of two investments at the end of Year O...
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(a) An investor is considering the purchase of two investments at the end of Year O that will yield the following cash flows: Year End of Year Cash Flow for Project X End of Year Cash Flow for Project Y Year 1 $2,000 $1,000 Year 2 $3,000 $3,000 Year 3 $4,000 $5,000 Year 4 $5,000 $2,000 2 If the appropriate discount rate for these investments is 10%, what will this investor be willing to pay for the investments? (b) Suppose you wish to invest $2,000 today so that you have $4,000 six years from now. What must the annual interest rate be in order to achieve your goal if interest is compounded quarterly? (a) An investor is considering the purchase of two investments at the end of Year O that will yield the following cash flows: Year End of Year Cash Flow for Project X End of Year Cash Flow for Project Y Year 1 $2,000 $1,000 Year 2 $3,000 $3,000 Year 3 $4,000 $5,000 Year 4 $5,000 $2,000 2 If the appropriate discount rate for these investments is 10%, what will this investor be willing to pay for the investments? (b) Suppose you wish to invest $2,000 today so that you have $4,000 six years from now. What must the annual interest rate be in order to achieve your goal if interest is compounded quarterly?
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Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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