1. Lance Murdock purchased a wooden statue of a Conquistador for $ 7200 to put i
ID: 1172532 • Letter: 1
Question
1. Lance Murdock purchased a wooden statue of a Conquistador for $ 7200 to put in his home office 8 years ago. Lance has recently? married, and his home office is being converted into a sewing room. His new? wife, who has far better taste than? Lance, thinks the Conquistador is hideous and must go immediately. Lance decided to sell it on? e-Bay and only received ?$4700 for? it, and so he took a loss on the investment.
What was his rate of? return, that? is, the value of i?? What was Lance? Murdock's rate of? return, that? is, the value of i?? Enter a negative percentage for a loss. ____?% ? (Round to two decimal? places.)
2. You are offered ?$90 ,000 today or $400,000 in15 years. Assuming that you can earn 15 percent on your? money, which should you? choose?
If you are offered ?$400,000 in 15 years and you can earn 15 percent on your? money, what is the present value of $400,000? $_____?(Round to the nearest? cent.)
3. Your grandmother asks for your help in choosing a certificate of deposit? (CD) from a bank with a? one-year maturity and a fixed interest rate. The first certificate of? deposit, CD? #1, pays
3.953.95 percent APR compounded annually?, while the second certificate of? deposit, CD? #2, pays 4.00 percent APR compounded monthly.
What is the effective annual rate? (the EAR) of each? CD, and which CD do you recommend to your? grandmother?
If the first certificate of? deposit, CD? #1, pays 3.95 percent APR compounded annually?, the EAR for the deposit is:_____?%. ?(Round to two decimal? places.)
Explanation / Answer
(1) Purchase Price = $ 7200 and Sale Price = $ 4700
Rate of Return = (4700 - 7200) / 7200 = -0.3472 or - 34.72 %
NOTE: The figure calculated above is the overall rate of return on the purchase. The annualized holding period return would be = (4700/7200)^(1/8) - 1 = - 0.05192 or - 5.192 %
NOTE: Please raise separate queries for solutions to the remaining unrelated questions.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.