An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.

An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800. Required: Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b. Note: Round your answer to 2 decimal places.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...

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Required:

Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%.
Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were invested for one year at 7%.
Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b.
Note: Round your answer to 2 decimal places.

An investor has accumulated $6,800 and is looking for the best rate of return that can be earned over the next year. A bank savings
account will pay 5%. A one-year bank certificate of deposit will pay 7%, but the minimum investment is $9,800.
Required:
a. Calculate the amount of return the investor would earn if the $6,800 were invested for one year at 5%.
b. Calculate the net amount of return the investor would earn if $3,000 were borrowed at a cost of 15%, and then $9,800 were
invested for one year at 7%.
c. Calculate the net rate of return on the investment of $6,800 if the investor accepts the strategy of part b.
Note: Round your answer to 2 decimal places.
a. Amount of return
b. Net amount of return
c. Net rate of return
%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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