a $710 investment today, and will pay $750 two years from now and
another $990 five years from now.
- You Are Considering A Safe Investment Opportunity That Requires A 710 Investment Today And Will Pay 750 Two Years Fr 1 (92.22 KiB) Viewed 44 times
You are considering a safe investment opportunity that requires a $710 investment today, and will pay $750 two years fr
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You are considering a safe investment opportunity that requires a $710 investment today, and will pay $750 two years fr
You are considering a safe investment opportunity that requires
a $710 investment today, and will pay $750 two years from now and
another $990 five years from now.
a. What is the IRR of this investment? The IRR of this investment is %. (Round to two decimal places.) b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. (Select the best choice below.) A. No, because the timing of the cash flows are different. B. Yes, you can always compare IRRs of riskless projects, and an investment in the bank is riskless. C. Yes, because the EAR is the same at all horizons, so the two "projects" have the same riskiness, scale and timing. D. No, this is like comparing the IRRs of two projects.
a $710 investment today, and will pay $750 two years from now and
another $990 five years from now.
a. What is the IRR of this investment? The IRR of this investment is %. (Round to two decimal places.) b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. (Select the best choice below.) A. No, because the timing of the cash flows are different. B. Yes, you can always compare IRRs of riskless projects, and an investment in the bank is riskless. C. Yes, because the EAR is the same at all horizons, so the two "projects" have the same riskiness, scale and timing. D. No, this is like comparing the IRRs of two projects.