How does this change your overall return on investment

Assignment Help Financial Management
Reference no: EM13925289

Suppose you invest $10,000 in a savings account earning 2% interest (compounded yearly) with no risk. After 7 years, how much will you have?

Repeat Question #1, but this time there is an inflation rate of 4%. How does this change your overall return on investment? If you had a chance to invest in an account with a long-term expected rate of 5%, with a 50% chance of earning 0% nominal compound interest and a 50% chance of earning 10% nominal compound interest in each year, would you choose this account, or the savings account? Why?

Reference no: EM13925289

Questions Cloud

Organization through service delivery strategies : Question 1: Explain how competitive advantage can be gained from within the organization through service delivery strategies.
Staff personnel to reduce line-staff : All of the following should be done by staff personnel to reduce line-staff conflict EXCEPT:
How the owners of the site will be able to generate revenue : Select a domain name, decide where the site will be hosted, and provide a detailed rationale for the choices made. Determine how the owners of the site will be able to generate revenue (i.e., which e-commerce models can be used)
Prepare a structured report on the investigation : You are required to prepare a structured report on the investigation of two distinctive job roles in the IT sector available to you within 5 years of graduation.
How does this change your overall return on investment : Suppose you invest $10,000 in a savings account earning 2% interest (compounded yearly) with no risk. After 7 years, how much will you have? but this time there is an inflation rate of 4%. How does this change your overall return on investment?
Research on existing or emerging it-related technology : Individual research on existing or emerging IT-related technology and related ethical issues
Grenfell company : Grenfell Company is preparing a cash budget for 2014 for purchases of Calvos.
Calculate jack gain or loss on the sale of his partnership : 1 Prepare each partner's outside basis in their respective partnership interest as of 12/31/14. 2 Calculate Jack's gain or loss on the sale of his partnership interest. The character of the gainor loss is not required.
What is the annualized risk free rate : You have run a regression of returns of lulus, against the S&P 500 Index using monthly returns over the last 5 years and arrived at the following regression: R lulus = -.20%+1.5R S&P500. If the stock had a Jensen’s alpha of +0.10% (on a monthly basis..

Reviews

Write a Review

Financial Management Questions & Answers

  Companys repayment be if you issue the coupon bonds

uppose your company needs to raise $36.8 million and you want to issue 23-year bonds for this purpose. Assume the required return on your bond issue will be 9.3 percent, and you’re evaluating two issue alternatives: In 23 years, what will your compan..

  Why the cost of ordinary share capital differ

Discuss two possible reasons why the cost of ordinary share capital differ between two business

  How much interest

Suppose you borrowed $14,000 at a rate of 10.0% and must repay it in five equal instalments at the end of each of the next five years. How much interest would you have to pay in the first year?

  What must the coupon rate be on the companys bonds

Ghost Rider Corporation has bonds on the market with 10 years to maturity, a YTM of 6.5 percent, and a current price of $926. What must the coupon rate be on the company’s bonds? (Do not round intermediate calculations. Enter your answer as a percent..

  Set of cash flows if the relevant discount rate

Consider the following cash flows: Year Cash Flow 0 −$31,000 1 17,300 2 15,200 3 10,600 Requirement 1: What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent? (Do not round intermediate calculation..

  Interest received at the end of the year is reinvested

You placed $1,360 in a savings account today that earns an annual interest rate of 9 percent compounded annually. How much will you have in this account at the end of 17 years? Assume that all interest received at the end of the year is reinvested th..

  How much are the monthly payments on the loan

Becky Lewis financed the construction of a garage on her lot with 9.3% add-on interest home improvement loan from the Guaranteed Savings Bank. The total price of the garage was $11,860 and was financed with equal monthly payments for 6 years. How muc..

  Required expected return for Biopharma according to the CAPM

Biopharma is a pharmaceutical company. Biopharma’s annual stock returns have a CAPM beta of 1.25 (i.e. β =1.25). The market portfolio’s return is 13%, and the riskfree rate is 5%. a. What is the required expected return for Biopharma according to the..

  Difference in the equations developed for requirements

Scatter Diagrams and High-Low Cost Estimation From April 1 through October 31, Will County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. What factors might have caused the difference in the equatio..

  Total material cost and the total manufacturing cost

You have been asked to estimate the cost of 100 prefabricated structures to be sold to a local school district. Each structure provides 1,000 square feet of flow space, with 8-feet ceilings. In 2003, you produced 70 similar structures consisting of t..

  Ongoing profitable operations

Mustaine Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $279,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven year..

  What is the price of the stock today

A company has just paid a dividend of $0.52. Next year's dividend is expected to be 15% higher, after which the dividend will remain the same indefinitely. Assuming shareholders require a rate of return of 20%, what is the price of the stock today?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd