ertomheducation.convrrn.ips E connect ch5 Question 5 (of 6) 5· 10.00 points Rust
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ertomheducation.convrrn.ips E connect ch5 Question 5 (of 6) 5· 10.00 points Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securties for sale to the public on March 28, 2008. Under the terms of the deal, RBMCC promised to repay the owner of one of these secunties $100,000 on March 28, 2038, but investors would receive nothing until then investors paid RBMCC $24,999 for each of these securities, so they gave up $24,999 on March 28, 2008 for the promise of a $100,000 payment 30 years later a. Based on the $24,999 price, what rate was REMCC paying to borrow money? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16) Rate of return b. Suppose that, on March 23, 2019, this secunty's pice is $43.280 If an investor had purchased it for $24,999 at the offering and sold it on this day, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g. 32.16)) nnual rate of returm c. It an investor had purchased the security at market on March 28, 2019, and hekd it unts it matured, what annual rate of return would she have earned? (Do not round intermediate calculations and round your tinai answer to 2 decimal places. (e.g.. 32.16) Annual rate of return References Diiculty Intermediate Check my workExplanation / Answer
a. Based on the $24,999 price, what rate was RBMCC paying to borrow money? (Do not round intermediate calculations and round your final answer to 2 decimal places. ( Present Value (PV) $24,999 Future value (FV) $100,000 Period 30 Rate = Rate(30,0,-24999,100000) (using excel) 4.73% Using Formula FV = PV(1 + r) t PV = $100,000 / (1 + r)^ 30 = $24,999 r =[ ($100,000 / $24,999) ^1/30] – 1 = 4.73% b. Suppose that, on March 28, 2019, this security’s price is $43280. If an investor had purchased it for $24,999 at the offering and sold it on this day, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16) Present Value (PV) $24,999 Future value (FV) $43,280 Period 11 Rate = Rate(11,0,-24999,43280) (using excel) 5.12% Using Formula FV = PV(1 + r) t PV = $43,280 / (1 + r)^11 = $24,999 r =[ ($43,280 / $24,999) ^1/311] – 1 = 5.12% c.If an investor had purchased the security at market on March 28, 2019, and held it until it matured, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Present Value (PV) $43,280 Future value (FV) $100,000 Period 19 Rate = Rate(19,0,-43280,100000) (using excel) 4.51% Using Formula FV = PV(1 + r) t PV = $100,000 / (1 + r)^ 19 = $43280 r =[ ($100,000 / $43280) ^1/19] – 1 = 4.51%
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