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- Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution State Future Price Asset K Future Price Asset L 1 $55 $60 2 $45 $30 The current price of asset K is $50, and the current price of asset L is $50. You plan to buy a home for $100,000 in the future. You want to guarantee that you will have the money. What would you buy/sell today to accomplish this, and what would it cost today?Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution State Future Price Asset K Future Price Asset L 1 $55 $60 2 $45 $30 The current price of asset K is $50, and the current price of asset L is $50. 5. You plan to buy a home for $100,000 in the future. You want to guarantee that you will have the money.What would you buy/sell today to accomplish this, and what would it cost today?3. A real estate company is considering the investment on two types of apartments: condo apartments and two-bedroom apartments. The expected profits for the two types at different scenarios and the corresponding probabilities are shown in Table 3. Before starting to profit, the company should first invest on the two types of apartments for 20 billion RMB on A1 and 15 billion RMB on A2 respectively. Please decide by calculation which type of apartments is worth investing for this company? Table 3 Expected profits by different scenarios (The profits are in billion RMB Yuan) Expected Sale Forecast Good Normal Bad Types/Probabilities 0.5 0.3 0.2 Condo (A,) 50 25 15 Two-bedroom (Az) 80 0. -25 3/3 1L
- Suppose that you could invest in the following projects but have only $24,480 to invest. Which projects would you choose? Project Cost NPV w $ 7,970 $ 3,000 x 10,990 7,530 y 8,500 4,280 z 6,750 3,890 You should invest in project(s)?****Only answer this question if you are sure about the correct answer **** ***Return on investment Question*** 27. If you want to remodel your house: a. The house was bought with a cost of $175,000. b. The house remodel will cost $38,000. с. After the remodel, the expected house value could increase by 4% 1. What is the ROI % (...............) 2. Yes or no, based on ROI is this a good investment (...........)Suppose that you could invest in the following projects but have only $29,700 to invest. How would you make your decision and in which projects would you invest? Project Cost A $7,850 B C D 11,060 9,200 6,540 NPV $3,200 6,460 4,150 3,090 You should invest in project(s)
- • Examine present values, future values, and efficient market hypothesis. • Synthesize knowledge of basic tools of finance. Computing the present value: 1. You are thinking of buying a six-acre lot for $70,000. The lot will be worth $100,000 in 5 years. A. Should you buy the lot if r = 0.05? B. Should you buy it if r = 0.10? The asymmetric information problem:Suppose that you could invest in the following projects but have only $29,700 to invest. How would you make your decision and in which projects would you invest? Project Cost NPV A $ 7,850 $ 3,200 B 11,060 6,460 C 9,200 4,150 D 6,540 3,090 You should invest in which of the following options? A & B only B & C only B & D only A, B, & C B, C & DExplain the importance of studying time value of money. Case study a. Let's say your friend offer simple investment. You are planning to buy an asset for RM 335. This investment is very safe. You would sell off the asset in three years for RM 400. You know you could invest RM 335 elsewhere at 10 percent with very little risk. What do you think of the proposed investment?
- Assume that you have two investment alternatives: the first project produces $125 for sure, and the second project produces $150 with probability 2/5. You can borrow $110 from your financial institution for one project (investment) if you show an asset as a collateral. Suppose that you maximize your expected profit, what would be the minimum level of collateral that make you select the safe project?Suppose you had the exact amount of money to buy your dream property. Would you pay cash or get a mortgage? Why? If it's relavent to your answer you can state a dollar amount and explain with numbers not words.You have calculated the value of an investment to be $100. If it costs $105, you should buy it. Select one: True False