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438. You have an investment opportunity that requires an initial investment of $5000 today and will
pay $6000 in one year. What is the IRR of this opportunity? CF0=5000, CF1=6000, IRR=20 51. Your bank is offering you an account that will pay 20% interest in total for a twoyear deposit.
Determine the equivalent discount rate for a period length of
a.
b. Oneyar.=95% c. 52. Sixmonths.=46%
Onemoth.=76% Which do you prefer: a bank account that pays 5% per year (EAR) for three years or
a. Anacouthpys2evrixmfa?PREFVY6MONTHS b. Anacouthpys7evr18mfa?PREF5%YA c. Anacouthpysermf?PREF½%MONTH 54. You have found three investment choices for a oneyear deposit: 10% APR compounded monthly,
10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for each
investment choice. (Assume that there are 365 days in the year.)
1. (1+{.1/12}^12)1 = 10.47%
2. (1+{.1/1}^1)1 = 10%
3. (1+{.09/365}^365)1 = 9.42% 57. Suppose the interest rate is 8% APR with monthly compounding. What is the present value of an
annuity that pays...
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This document was uploaded on 03/09/2014 for the course FIN 301 at SUNY Albany.
 Spring '14
 CarlMagiocomo
 Corporate Finance, Future Value

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