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evablogger [386]
3 years ago
12

A financial advisor offers you two investment opportunities. Both offer a rate of return of 11%. Investment A promises to pay yo

u $450 in 1 year, $650 in 2 years, and $850 in 3 years. Investment B promises to pay you $850 in 1 year, $x in 2 years, and $450 in 3 years. What must x be to make you indifferent between Investing A and B
Business
1 answer:
dsp733 years ago
3 0

Answer:

The value of x is 566.36

Explanation:

The value of x should be such that the present value of both Investments is the same when discounted at a rate of 11%. To calculate the present value, we use the following formula,

Present Value = CF 1 / (1+r)  +  CF 2 / (1+r)^2 + ... + CFn / (1+r)^n

Where,

  • CF represents Cash flow
  • r represents the discount rate

So, we equate both the present value of Investment A and B to calculate the value of x.

Present Value of A = Present Value of B

450/(1.11)  +  650/(1.11)^2  +  850/(1.11)^3 = 850/(1.11)  +  x/(1.11)^2  +  450/(1.11)^3

1554.472661  =  765.7657658  +  x/(1.11)^2  +  329.0361216

1554.472661  -  765.7657658  -  329.0361216  =  x/(1.11)^2

459.6707736 * (1.11)^2  =  x

x = 566.3603602 rounded off to 566.36

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5 0
3 years ago
F one U.S. dollar equals one euro, which of these could result if the euro experiences inflation?
Alika [10]

Answer: The correct option is C.

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Inflation indicates the decrease in purchasing power of the currency of a nation.

Therefore if the euro experiences inflation, this would lead to a decrease in purchasing power of the currency. Hence, the more stable currency which is the dollar, that was initially equal to the euro, will now surpass the euro in value and purchasing power.

This will lead to the ability to procure more goods and services from the E.U. using the dollar.

7 0
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The shareholders' equity of Janeek Enterprises includes $253,600 of no par common stock and $532,300 of 5% cumulative preferred
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Answer:

$3,115

Explanation:

Preferred stockholders has an advantage that they are paid first when there is any dividend is announced. The residual dividend will be divided into the common stockholders. Any prior years due dividend and current years dividend associated with preferred share will be paid first.

As per given data

Preferred shares = $532,300

Dividend on preferred shares = $532,300 x 5% = $26,615 per year

As in 2015 $23,500 was declared, the dividend of $26,615 is due in respect of preferred dividend.

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All the dividend of $23,500 is paid to preferred stockholders there is no dividend for common stockholders in 2015 and still there are arrears of $3,115 due in respect of preferred dividend.

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3 years ago
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