What is the expected value of each investment

Assignment Help Financial Management
Reference no: EM131047742

You are trying to decide whether to invest some idle cash in undeveloped land or gold. You intend to hold either investment for 5 years before selling out and sailing the Caribbean. You have made the following estimates of the value of the land and gold 5 years from now:

Land

Probability Cash Flow

0.2 $60,000

0.5 $80,000

0.3 $100,000

Gold

Probability Cash Flow

0.3 $40,000

0.4 $85,000

0.3 $140,000

1) What is the expected value of each investment?

Reference no: EM131047742

Questions Cloud

An individual medical insurance policy covering : Jennifer, age 28, is divorced and has a son, age one. Six months ago, Jennifer purchased an individual medical insurance policy covering the entire family. Her son was recently diagnosed with congenital heart disease.
Purchase zero coupon bond : You are looking to purchase a zero coupon bond. The bond has 10 years until maturity and you require an 8% annual rate of return. What should you pay for this bond? You just purchased a bond for $974.42 that matures in 5 Years. The bond was originall..
What is the predicted price change for your bond : The duration of GE bond you own is 6.00 years. Currently, interest rates are 7.00%, but you believe the Fed is about to increase interest rates by 24.00 basis points. What is the predicted price change for your bond?
How the partners split profits and losses : How the partners split profits and losses, how the partnership is dissolved. Feel free to make up portions of your partnership agreement or necessary facts.
What is the expected value of each investment : You are trying to decide whether to invest some idle cash in undeveloped land or gold. You intend to hold either investment for 5 years before selling out and sailing the Caribbean. You have made the following estimates of the value of the land and g..
Managing a pension fund whose liabilities : You are managing a pension fund whose liabilities have average duration of 13 years. You want to immunize the interest rate risk and are considering 6-year maturity zero-coupon bonds and 4.00% yield perpetuities. How much of the portfolio should you ..
Determine price elasticity of demand : Evaluate Eskoms products in terms of the availability of close substitutes
What alternative capital structure would you recommend : Assuming Pacific Energy Limited's credit rating is AAA, what alternative capital structure would you recommend lowering the cost of capital to the company
How would you go about dissolving presidents co : Review your book regarding corporate dissolution. How would you go about dissolving Presidents Co.? The answer should be fairly simple, I am just looking for a way to dissolve the company.

Reviews

Write a Review

Financial Management Questions & Answers

  Statements about the future value of a dollar is true

Which of the following statements about the future value of a dollar is true?

  Average accounts receivable balance

Knight Roundtable Co. has annual credit sales of $576,000 and an average collection period of 35 days in 2008. What is the company’s average accounts receivable balance?

  Compute the percentage total return-capital gains yield

Suppose a stock had an initial price of $121 per share, paid a dividend of $3.30 per share during the year, and had an ending share price of $153. Compute the percentage total return. What was the dividend yield? What was the capital gains yield?

  Cost of carrying silver includes storage costs

Assume that the cost of carrying silver includes storage costs. On March 17, 2015 the May 2015 futures contract settled at $ 15.578 per ounce (assume it is a 2-month contract), spot traded at $ 15.562 per ounce. Storage costs per ounce are about 0.2%..

  Although NOLs represent a potential source of value

Although NOLs represent a potential source of value, their use must be monitored carefully to realize their full value resulting from the potential for deferring income taxes. The sale of assets by a target firm will result in a taxable gain if the f..

  What amount must be invested each year to accumulate

A saver wants $100,000 after ten years and believes that ist is possible to earn an annual rate of 8 percent on invested funds. What amount must be invested each year to accumulate $100,000 if... a.) the payments are made at the beginning of each yea..

  According to relative purchasing power parity

According to relative purchasing power parity, if the inflation rate in Italy was 8% and the inflation rate in Israel was 6%,

  Effective annual percentage cost of non-free trade credit

Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 3/13, net 57. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit?

  About the risk averse

If you are risk averse, you should choose an asset allocation that is:

  What is the expected inflation rate

Using the expectations theory, what is the yield on a 1-year bond, one year from now? Calculate the yield using a geometric average. What is the expected inflation rate in Year 1?

  Present value of an annuity

Present Value of an Annuity What is the present value of a $2,100 annuity payment over 7 years if interest rates are 11 percent?

  Charges an interest rate-what is the effective annual rate

Big Dom’s Pawn Shop charges an interest rate of 27.6 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What is the effective annual rate?

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