=
End of Chapter Key
Chapters 4,5,6 and8
Chapter 4
23.
A. PV = $18,000; FV = $30,000; N=5
Using Financial Calculator (HP 10BII), find rate of return in this investment
18,000 +/- PV
30,000 FV
5 N
I/YR 10.75%
Since 10.75% > 10.0% Acceptable investment
B. I/YR 8.73%
Since 8.73% < 10.0% Unacceptable investment
C. I/YR 11.06%
Since 11.06% > 10.0% Acceptable investment
D. . I/YR 7.0%
Since 7.0% < 10.0% Unacceptable investment
29. Holding period return (HPR) ?
If the investments are held beyond a year, the capital gain (loss) component would not be realized and would likely change. Assuming they are of equal risk, Investment Y would be preferred since it offers the higher return (16.0% for Y versus 11.67% for X).
43. (a) Investment A, with returns that vary widely¡Xfrom 1% to 26%¡Xappears to be more risky than Investment B, whose returns vary from 8% to 16%.
(b)
Investment A:
(1) (2) (3) (4)
Return Average (1) ¡V (2) (3)2
Year r i Return, r ri ¡V r (ri ¡V r)2
2001 19% ...