In 2015, an investor has an endowment of $300 which he can invest either in a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In 2015, an investor has an endowment of $300 which he can invest either in a bond or in a new factory being set up. The bond pays interest of 10% per year compounded yearly, for 3 years, starting from 2016. In the last year, it pays back the initial principal amount as well. The new factory project gives a fixed real income return of $200 every year for the next 3 years. Assume that the investor ignores the initial investment of $300 to calculate the present value of his retums and the nominal discount rate for both of the investment options is 10% The price levels for years 2015 to 2018 are given in the table below, Year 2015 2016 2017 2018 Price Level (P) 1.05 1.00 1.1 1.15 The real present value for the returs from the new factory project (V) (Round your answer to two decimal places) The equation used for this calculation is The real present value for the retums from the bond is (V) is 50 (Round your answer to two decimal places) In 2015, an investor has an endowment of $300 which he can invest either in a bond or in a new factory being set up. The bond pays interest of 10% per year compounded yearly, for 3 years, starting from 2016. In the last year, it pays back the initial principal amount as well. The new factory project gives a fixed real income return of $200 every year for the next 3 years. Assume that the investor ignores the initial investment of $300 to calculate the present value of his retums and the nominal discount rate for both of the investment options is 10% The price levels for years 2015 to 2018 are given in the table below, Year 2015 2016 2017 2018 Price Level (P) 1.05 1.00 1.1 1.15 The real present value for the returs from the new factory project (V) (Round your answer to two decimal places) The equation used for this calculation is The real present value for the retums from the bond is (V) is 50 (Round your answer to two decimal places)
Expert Answer:
Related Book For
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese
Posted Date:
Students also viewed these economics questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Each student will interview a manager or an employee (who might be a family member, a friend, or an acquaintance) to determine the extent to which the issues raised in the case are represented in his...
-
The financial statements for Nike, Inc., are presented in Appendix E at the end of the text. The following additional information is available (in thousands): Accounts receivable at May 31, 2013...
-
After the issuance of its audit report, a CPAfirm may encounter evidence indicating that the client's financial statements were materially misstated or lacked required disclosures. 1) What actions...
-
Tabletop Snow Zone is a ski field on the outskirts of Perth. It offers ski packages for the both experienced and novice skiers and also operates a caf and gear shop on the mountain. Tabletop Snow...
-
Condensed financial data of Jhutti Company appear below. Additional information: 1. Equipment costing $92,000 was purchased for cash during the year. 2. Investments were sold at cost. 3. Equipment...
-
C&C Sports' decision to remain a domestic producer is a strength as it allows the company to have better control over product quality and quick delivery to the local market. Product Range: The...
-
A nutrition plan app has a subscription that costs $10/month. The following chart gives average historical renewal rates for subscribers based on how many months they have been a subscriber. Month 1...
-
Mr. Good has reached his 67 birthday and is ready to retire. He has been a hard worker and had lived a provident life and diligently saved his money. He owns his own home (his mortgage was paid off...
-
A physician is making an image with ultrasound of initial intensity \(1000 \mathrm{~W} / \mathrm{m}^{2}\). When the frequency is set to \(1.0 \mathrm{MHz}\), the intensity drops to \(500 \mathrm{~W}...
-
You want to estimate the diameter of a very small circular pinhole that you've made in a piece of aluminum foil. To do so, you shine a red laser pointer \((\lambda=632 \mathrm{~nm})\) at the hole and...
-
When you voice the vowel sound in "hat," you narrow the opening where your throat opens into the cavity of your mouth so that your vocal tract appears as two connected tubes. The first is in your...
-
A miniature spectrometer used for chemical analysis has a diffraction grating with 800 slits \(/ \mathrm{mm}\) set \(25.0 \mathrm{~mm}\) in front of the detector "screen." The detector can barely...
-
A \(10 \mathrm{nC}\) charge sits at a point in space where the magnitude of the electric field is \(1200 \mathrm{~N} / \mathrm{C}\). What will the magnitude of the field be if the \(10 \mathrm{nC}\)...
-
Discuss the nature of slavery in West Africa before the beginning of the trans-Atlantic slave trade. Consider: How important was slavery to African society and to the African economy? What roles did...
-
Before the 1973 oil embargo and subsequent increases in the price of crude oil, gasoline usage in the United States had grown at a seasonally adjusted rate of 0.57 percent per month, with a standard...
-
The Division of Motor Vehicles (DMV) is part of the State Department of Transportation (DOT). The purpose of that department is to ensure the safety and free flow of people and goods throughout the...
-
Why do financial statements often show numbers rounded off rather than exact to the dollar?
-
Use the ending balances from Problem 10- 27 to prepare a balance sheet.
-
(a) During a certain day the outdoor temperature ranges between \(60^{\circ} \mathrm{F}\) and \(80^{\circ} \mathrm{F}\). What is the corresponding range in degrees Celsius and in kelvins? (b) The...
-
Which is greater in each pair: (a) the thermal energy of a pool of water or that of a glass of water at the same temperature, (b) the heat capacity of a pool of water or that of a glass of water at...
-
Which of the following systems undergo a quasistatic process? (a) A gas-containing balloon is popped inside a vacuum container. System: container, gas, and balloon. (b) A cup of coffee cools down....
Study smarter with the SolutionInn App