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3 years ago

11

you want to put $2,500 in a simple interest account. It has a 4% annual interest rate. How long will it take you to earn $200 in

interest?

1 answer:

Solnce55 [7]3 years ago

6 0

It will take 2 years because eaxh year you get 4% of the $2500 which means $100 a year

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If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, wha

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3 years ago

Identify several advantages and several disadvantages of open-source operating systems. include the types of people who would fi

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4 years ago

Suppose the real risk-free rate is 3.50%,the average future inflation rate is 2.50%, a maturity premium of 0.20% per year to mat

drek231 [11]

Answer:

the 5 year A-rated corporate bond yields 0.3% more than the 10-year Treasury bond

Explanation:

the yield of a 10 year treasury bond = real risk free rate + average future inflation rate + (maturity premium x number of years) = 3.5% + 2.5% + (20% x 10 years) = 8%

the yield of a 5 year A-rated corporate bond = real risk free rate + average future inflation rate + liquidity premium + default risk premium + (maturity premium x number of years) = 3.5% + 2.5% + 0.5% + 0.8% + (20% x 5 years) = 8.3%

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3 years ago

The Karns Oil Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the p

Vika [28.1K]

Answer:

Investing today is a better option because it has a better NPV of $2.3398 million

Explanation:

Given data :

<u>For Today's Investment </u>

Initial capital investment = $4 million

positive cash flow = $2 million

period of cash flow = 4 years

project cost of capital = 10%

To get the value of This option we have to determine the NPV of this option

NPV = PMT * $[\frac{1-(1+r)^-4}{r} ] - initial cash flow$ ----------- (1)

PMT = $2 million

r = 10%

initial cash flow = $4 million

Equation 1 becomes

NPV = (2 * 3.1699 ) - 4

= $6.3398 - $4 = $2.3398 million

<u>For later investment ( 2 years )</u>

initial capital investment = $5 million

90% chance of positive cash flow = $2.1 million

10% chance of positive cash flow = $1.1 million

project cost of capital = 10%

NPV value for a cash flow of $1.1 million

NPV = PMT * $[\frac{1-(1+r)^-4}{r} ] - initial cash flow$

PMT = $1.1 million

initial cash flow = $5 million

r = 10%

Hence NPV = ($1.1 * 3.1699 ) - $5 million

= $3.48689 - $5 million

= - $1.51311

therefore the present NPV = - $1.51311 / 1.21 = -$1.25 million ( therefore no investment will be made )

NPV value for a cash flow of $2.1 million

NPV = PMT * $[\frac{1-(1+r)^-4}{r} ] - initial cash flow$

PMT = $2.1 million

initial cash flow = $5 million

r = 10%

hence NPV = ($2.1 * 3.1699 ) - $5 million

= $6.65679 - $5

= $1.65679

therefore the present NPV = $ 1.65679 / 1.21 = $1.369 million

The Expected NPV value of later investment ( after 2 years )

= $0 * 10% + $1.369 * 90%

= $1.2321 million

4 0

3 years ago