Chapter 4: Q3DQ (page 436)
When is the coefficient of variation a better measure of risk than the standard deviation?
The coefficient of variation is better than the standard deviation when the company wants to compare investments of different sizes.
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If you invest $8,500 per period for the following number of periods, how much would you have? a. 12 years at 10 percent.
Juan Garza invested $20,000 10 years ago at 12 percent, compounded quarterly. How much has he accumulated?
If, as an investor, you had a choice of daily, monthly, or quarterly compounding, which would you choose? Why?
Jack Hammer invests in a stock that will pay dividends of \(2.00 at the end of the first year; \)2.20 at the end of the second year; and \(2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for \)33. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.)
Question: You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.
a. What single payment could be made at the beginning of the first year to achieve this objective?
b. What amount could you pay at the end of each year annually for 10 years to achieve this same objective?
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